How to fund a genuine pension guarantee

The government's £75 "pension guarantee", which Frank Field rightly criticises as a disincentive to savings, is neither a pension nor a guarantee ("A hand-up or a put-down for the poor?", 27 November). It is the pensioner rate of income support, not the pension itself, that is to be increased in April by £3 a week for a single pensioner. Those above income support level will get nothing.

At least half a million pensioners below income support level will also get nothing. At present, about a million - roughly one in three of those entitled - do not claim income support. When the "guarantee" was announced in July, Harriet Harman made much of her plans to trace them. But the pensions minister, John Denham, has admitted that in costing the guarantee, most of the missing millions are assumed to be still missing as far ahead as 2002.

If the government really wants to provide a £75 guarantee, it can do so without the take-up problems and administrative waste of means-testing by raising the basic pension from £64.70 to at least £75. Considering that the pension would be over £90 if the earnings link had not been broken in 1980, £75 is not over-generous.

Nor is it unaffordable. Instead of national insurance contributions being reduced by £1.4 billion a year, as is the government's intention, a modest increase would be needed; but most working people would consider this a price worth paying for the assurance that, when they reach retirement, the state pension will be worth having.

Tony Lynes
Vice-chairman, Southwark Pensioners Action Group
London SE5

This article first appeared in the 04 December 1998 issue of the New Statesman, Just get out and have fun!