Britons will be urged to work longer and save harder to pay for their retirement by a long-awaited report on reforms to company and state pensions due to be published yesterday.

Set up three years ago, the Pensions Commission was asked to look at problems facing Britain's pension system, creaking under the pressure of an ageing workforce and facing a 57 billion pounds (US$98 billion) shortfall in retirement savings.

Many industrialized nations, including the United States, Germany and Japan, have similar problems.

Proposals are expected to include raising the age at which people take a state pension, possibly up to 67 for men from the current qualifying age of 65.

As people live longer, birth rates fall and populations age, there are fewer people working to support an increasing number of retirees.

Leaks of the report have already turned it into a hot political issue in Britain. Media have speculated it might stoke tensions between British Prime Minister Tony Blair and Finance Minister Gordon Brown, widely seen as his most likely successor.

The commission, chaired by Adair Turner, is expected to advocate policies to encourage citizens to work longer, push companies to fund retirement pots and increase state pensions.

The government will be asked to do more, raising state pensions in line with earnings, rather than prices that tend not to go up as fast, while reducing the need for retirees to rely on means-tested benefits.

Media leaks

The Guardian said Turner would float the prospect of people receiving a state pension at the age of only 68 or 69.

He would also propose compelling employers to contribute 3 per cent of salaries to workers' pensions, the Times reported.

It said employees would have to pay 4 per cent of earnings and the government a further 1 per cent.

Blair said on Tuesday he supported Turner's report, which he has seen, as he sought a balance between the obligations of employer, employee and state and has pledged to act quickly.

But he said any reforms must be affordable, a government position which could leave room to reject some of Turner's recommendations.

Brown is reported to fear that a higher state pension, linked to average earnings, would leave government with a huge bill in years to come. His central approach has been to use means-testing to target money at the poorest pensioners.

No firm decisions will be taken soon. The report will trigger a consultation process which will lead to detailed proposals published by the government in the first half of 2006.

"Pensions policy, like all long-term decisions needs a consensus. We are seeking a settlement for a generation not a parliament," Blair said.

Critics say the government has already skewed the system by agreeing millions of public sector workers already in service can still retire at 60 raising the prospect of a double standard for the private sector. Trade and Industry Secretary Alan Johnson said he would stick by that deal, but said: "The whole thrust of government policy is to encourage people to work longer."

The commission was also asked to consider whether employees and companies should be compelled to put money into work-based pensions, as happens in countries such as Australia.

Analysts have said they expect the report to embrace the idea of "soft compulsion", which means employers would be obliged to contribute to workers' pensions if employees did so.

Source: China Daily