WIDENING inequality between rich and poor pensioners in Britain was forecast yesterday in a report prepared for the Government.
Social Security Minister Harr-iet Harman said the report sounded a ''clear warning'' to working people in their thirties and forties that they faced a big drop in their income when they retire.
''On average, people can expect their incomes to fall by between 20% and 30% in retirement.
''This report shows that more people will face a bigger drop in their income when they retire - a drop they certainly don't expect to face, and one which is avoidable,'' she said.
The Government, however, was accused of dragging its feet in bringing forward new pension proposals. Conservative Social Security Spokesman Simon Burns said: ''New Labour have been in office for over a year, but the rhetoric about stakeholder pensions has not been matched by any detail.
''The Pensions green paper which was promised by the end of May has now been pushed back until October.
''This report confirms that Mr Blair cannot afford to postpone decisions any longer.''
The publication was prepared by the independent Pension Provision Group which sees a growing divide between people relying on the state pension, and those with a well-funded second pension.
Part of the problem it identifies is that the State pension is linked to rises in prices, not increases in income, which are currently growing at a faster rate than prices.
It identifies three groups most vulnerable to poverty in retirement - women, part-time workers, and self-employed.
One suggestion is that self-employed people may be forced to take out a private pension in order to provide for their retirement. About half at present do not do so.
The report identifies that although the number of pensioners will increase - by 40% by 2040 - state pensions will at least remain affordable to the country because they are set at such a low level. Instead more and more pensioners will have to rely on State schemes such as housing benefit to top up the state pension to a tolerable level.
As the group's chairman, Mr Tom Ross, stated: ''If pension policies remain as they are, we can expect widening inequality between people who have good pensions in retirement and those who do not.
''It is very important that those who can reasonably be expected to save for their retirement have cost-effective and sensibly-regulated ways to do so.''
The report says that a second private pension is not always the answer, particularly for those on low pay or who spend long periods without earnings.
For these pensioners, says the report, the State will have an inescapable role in ensuring they are provided for, initially through encouraging people where possible to save for retirement, but also ensuring that costs for administering small amounts of pension rights are kept low.
It warns: ''Improved public awareness and understanding of pensions are important ingredients of better pension provision.
''The current complexity in all types of provision, and in pensions regulations, makes it very difficult for a satisfactory level of awareness and understanding to be achieved.''
In response, Ms Harman stressed the Government's plans for ''stakeholder'' pensions, to be aimed mainly at people without access to occupational schemes, to give them a second pension.
She added: ''The report reinforces our view that there is a role for the State in partnership with the individual. The State cannot do everything to bridge the fall in income, but individuals on their own without the right policy framework cannot sort that gap out.''
Stakeholder pensions, she said, would have low charges, would not penalise people taking career breaks and would be flexible so that people did not lose out when they changed jobs.
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