Lib Dems play for grey vote with £105 a week pension plan

The Liberal Democrats yesterday proposed a £2bn rise in pensions for the over-75s by abolishing the Department of Trade and Industry (DTI). By that - and selling off the Royal Mint - the party proposes guaranteeing every person over 75 an income of £105 a week.

The Liberal Democrats yesterday proposed a £2bn rise in pensions for the over-75s by abolishing the Department of Trade and Industry (DTI). By that - and selling off the Royal Mint - the party proposes guaranteeing every person over 75 an income of £105 a week.

The policy, which means an extra £25 a week, is designed to lift older pensioners out of poverty and end means testing. Retired people find it degrading and off-putting. The proposal is also intended to position the Liberal Democrats as the party of the growing "grey vote" in the next general election.

Under the plans, single pensioners over 75 would be guaranteed a state pension of £105.45 a week, and couples over 75 would have £160.95 regardless of their income. The party would scrap the Government's system of tax credits for pensioners over 75, which it says is too complicated and puts off many from claiming the money they are owed.

The pension uplift, launched yesterday by Charles Kennedy, will help older women whose pensions lag far behind men who have worked all their lives. Two thirds of the 2.2 million poorest pensioners are women whose average pension is only £51 a week.

"This is about fairness for all pensioners," Mr Kennedy said. "Overnight, we will lift one million pensioners out of means-testing and we will ensure an extra £25 a week on the basic state pension for single pensioners. Many pensioners are missing out on a decent pension because of the complexity of the Government's pension credit. Our Citizen's Pension will give people a decent pension as a right without needless form-filling and bureaucracy."

Women who stay at home to care for their children and work part-time have lost after retiring because they have patchy national insurance contributions records which effect the final pension payouts.

Under the Liberal Democrat plans, every pensioner couple would be guaranteed the same amount of cash regardless of their wealth or whether they have savings.

The plans will be compared to child benefit for which all families qualify, regardless of income. Only poor, disabled pensioners, who would qualify for extra government cash, would still be means-tested under the proposed plans.

The new policy would cost £2.7bn, which would be partly funded by the abolition of the DTI, cutting aid for industry and scientific research. Another £1bn would come from cuts at the Treasury and the sale of the Royal Mint, and more cash would come from abolishing civil service jobs at the Department for Culture, media and sport and the Department for the Environment.

But Patricia Hewitt, the Secretary of State for Trade and Industry, said plans to scrap her department were "political lunacy". She added: "The main bulk of our budget is ring-fenced for science and innovation, creating the wealth for our country on which all our pensions depend. Scrapping the DTI would rob Britain of a key tool in creating jobs, helping businesses thrive and ensuring rights at work are upheld."

The Liberal Democrats admitted the reforms could not be extended to younger pensioners. But Steve Webb, its pensions spokesman, said the party would look at raising pensions for all elderly people in a second term of office.

Under the plans those aged 60 to 74 would continue to receive Labour tax credits, which are based on income, and would still have to undergo means- testing. "The Government has made a mess of pensions," Mr Webb added. "These measures provide dignity for all pensioners while creating a simple and flexible framework for those who save in occupational and private schemes. Offering a generous state pension which does not lose its value means that in one fell swoop one million pensioners are taken out of means-tested benefits."

In its policy document, Dignity and Security in Retirement, the party also launched plans to reform occupational pension schemes. The Liberal Democrats want a kite-mark scheme so employees can see the rating a company's scheme has been given. They also want to increase incentives to save for private pensions.

Joe Harris, general secretary of Britain's biggest pensioner organisation, the National Pensioners' Convention, said: "A higher state pension to the over-75s will be seen as divisive when one in five people over 60 still live in poverty and the money is available now to give every pensioner at least £105 a week."