Labour plan angers pensioners

Policy is 'little different' from Tories,says Nicholas Timmins

Labour yesterday published its plans for future pension policy shorn of any firm spending commitments.

They brought an assessment from Paul Johnson, a specialist at the independent Institute of Fiscal Studies, that in terms of broad outline and firm commitments, Labour's policy now was "little different from the Government's".

The package brought a warning from Jack Jones, President of the National Pensioners' Convention, that a determined effort would be made at this year's Labour party conference to restore the link between pensions and earnings which Labour had promised at the last election.

Chris Smith, Labour's social security spokesman, insisted Labour's plans would offer new security in retirement as the party said its "over-arching objective" was to ensure that all pensioners "share fairly in the increasing prosperity of the nation".

Labour's package includes a "wish to put in place" a new form of funded second-tier pension as an alternative both to SERPS, the State Earnings- Related Pension Scheme, and personal pensions.

Employers, trade unions, insurers, investment companies and friendly socieities would bid to run a limited number of multi-employer and industry- wide schemes, operating under Government-devised rules. Labour believes that such a scheme should offer lower management costs than personal pensions and produce better returns than the existing system of SERPS.

The pensions could include "individual savings accounts" allowing people to top up their basic contribution with savings that could be used for pensions or other purposes, although tax treatment of those is undecided.

For the poorest pensioners, income support may become a "pension entitlement" with simpler claim forms and with council tax and housing benefit records used to help identify the 600,000 poorest pensioners who are entitled to income support but do not claim it.

If completely successful, that could add around pounds 500m to public spending, although Mr Smith claimed the money, in theory, was already in the Government's budget.

It will "keep under review" the idea of a guaranteed minimum pension and will consider paying contributions into SERPS for carers and those on low wages.

The basic state pension will remain and "at the very least" rise in line with prices, Mr Smith said, but Labour is refusing to say that it would rise in line with earnings. An independent body, which will include pensioners, will monitor Labour's performance, he added.

The package was greeted as "fundamentally disappointing" by Help the Aged for its lack of firm commitments. A Tory spokesman said that Labour, in reality, planned to raise pensions in line with earnings and introduce a guaranteed minimum pension.

Paul Johnson of the Institute for Fiscal Studies, said the proposals as far as they went were "perfectly sensible". But, he added, while "radically different" to Labour's 1992 manifesto commitments - a pounds 5 and pounds 8 rise in pensions, and restoration of their link to earnings - "they leave not a lot of difference between the Conservatives and Labour."

Jack Jones said "I appreciate the sincerity of Chris Smith", but when single pensioners had become pounds 23 a week worse off and couples pounds 37 worse off since the earnings-link was broken in 1980 it was, he said, "essential" that the link was restored and that "some compensation" was made for that loss.