THE pension shake-up will only go some way to relieving the UK crisis, according to a Swindon expert.

Gary Mothersill, a financial adviser with Morris Owen in Devizes Road, said the Government's White Paper on pensions, announced yesterday, only goes part way to solving the problem.

In the reforms the biggest in half a century the state pension age will increase from 65 to 68 by 2044, while the pensions themselves will be linked to levels of earnings rather than the rate of inflation.

The number of years needed to qualify for a full basic state pension will also reduce from 39 to 30, with the Government introducing a personal account which workers will be automatically enrolled in but could opt out of.

The scheme would see individuals contributing four per cent of their pay, companies paying three per cent and the Government donating one per cent.

Mr Mothersill feels the period over which the changes will come into force is too long.

He said: "This is a step in the right direction, but it is far too distant in the future and, of course, these plans need the backing of successive Governments the time frame in itself seems like a get-out clause.

"These plans will not help the current generation of upcoming pensioners, they are seemingly skipping a generation."

However he did welcome many aspects of the reforms.

"The plan to change the link from inflation to earnings is a good idea, and will be welcomed by the man on the street because earnings generally rise faster than inflation, but there will be a fairly mixed reception on the new personal accounts scheme," he said.

"There is very much an apathy towards saving for pensions and many will not like the idea of being enrolled on such a scheme.

"What isn't clear yet is where company pensions, like many of us have now, will fit into all this, especially after pension rules changed earlier this year."

Jo Osorio, director of Age Concern Swindon, agreed.

"The Government has hit the target but missed the bullseye," he said.

"This White Paper has delivered a win for future pensioners but is off the mark for today's.

"This has to be a settlement for all generations.

"Unless the Government intervenes quickly, the real value of the basic state pension will fall to a dismal £72 by 2012.

"Today's pensioners will have to wait a long time to see any gains from this new settlement.

"At the very least, the Government should make the link between Pension Credit and earnings statutory so that current pensioners don't get poorer the longer they live."

The future

School leavers of today face working until they are 68 under reforms of the pensions system.

Here are the key points:

  • The state pension age will increase to 68 from 2044
  • The rise will be gradual, with the state pension age rising to 66 from 2024 and 67 from 2034
  • The state pension age for women will start to rise from 60 to 65 from 2010 to match men
  • State pensions will be linked to earnings rather than prices from 2012
  • The number of years needed to qualify for a full basic state pension will be reduced from 39 to 30
  • Weekly credits will be introduced for those who care for children and the severely disabled for 20 hours a week
  • The Second State Pension will evolve into a flat rate system by around 2030
  • A new scheme of "personal accounts" will be introduced from 2012 similar to the National Pensions Saving Scheme (NPSS) put forward by Lord Turner
  • Workers aged between 22 and state pension age will be automatically enrolled in the scheme, although they will retain the right to opt out
  • Individuals will contribute four per cent of their pay, companies will pay in three per cent, and the Government will donate one per cent through tax relief
  • The self-employed and those not in work will be able to join the scheme
  • The DWP said employers could manage the increased costs in a number of ways. It said: "They can adjust prices, offer lower wage increases or absorb the costs through profits."