Politics: Pensions poverty faced by millions

MILLIONS of people could face a drop of up to 30 per cent in their income after they retire unless pensions provision is improved, the Government was warned yesterday in an independent report.

The report provided more ammunition for the Social Security Secretary, Harriet Harman, who has been at the centre of a battle with the Treasury over a Green Paper setting out the Government's long-term plans for "stakeholder" pensions to top up the existing state pension.

Launching the report, by a committee chaired by pensions consultant Tom Ross, Ms Harman denied the Treasury had forced the Green Paper to be delayed and insisted that it would be published before the end of the year.

"The report sounds a clear warning that many people now working, perhaps in their thirties or forties, face a big drop in their income when they come to retire," she said. "On average, people can expect their incomes to fall by between 20 and 30 per cent in retirement.

"This report shows that more people will face a bigger drop in their income when they retire - a drop they certainly don't expect to face and one which is avoidable."

Ms Harman will also use the report's findings to reject demands by pensioners campaigners for the state pension to be linked in future to rises in earnings, as well as prices. It found that it would lead to some elderly people living alone losing income support.

But the report endorses the main thrust of Government policy to top up the state pension with "stakeholder" pensions. Ministers hinted yesterday that they will avoid making the contributions compulsory, but they did not rule out a form of means testing of the state pension in the future, although the manifesto pledge ruling out means testing will last until the next election.

One of the key findings of the panel was that fears of a "pensions time bomb" - with today's children being unable to afford the tax-based state pension for the future - were unfounded.

The report also criticised the Government for failing to make a coherent approach across Whitehall towards pensions, but Mr Ross denied it was intended as a personal attack on ministers, following reports of clashes between Ms Harman and her deputy, Frank Field.

Compulsory pensions, page 26