Lib Dems pledge ?100 pensions boost

The Liberal Democrats today put pensions in the electoral frontline, with a promise to boost payments to everyone over 75 by ?100 a month.

With the Conservatives on the attack over pensions with a debate in the Commons tomorrow, and last night's shock resignation of the pensions secretary, Andrew Smith, the Lib Dems rolled out an election platform which would see the basic state pension break the ?100-a-week barrier for the first time.

The renamed "citizen's pension" would be increased from just under ?80 to ?105 a week for the four million oldest pensioners, and the link between average earnings and pensions restored, in a ?2.7bn scheme which is set to form a central plank of the Lib Dems' agenda for the upcoming general election.

The party also promised to make pensions fairer, especially for women, by basing eligibility on residency, rather than national insurance contributions.

The party will also propose a new low-cost personal pension run by National Savings to offset concerns about private policies following the Equitable Life crisis.

According to the party, couples over 75 would have an extra ?33.70 a week, with a million people removed from the indignity of means-testing.

The new "citizens' charter" would be based on residency rather than national insurance contributions, and the Lib Dems claim it would benefit women currently reliant on a husband's pension or penalised for caring for children at home.

It would also restore the link, broken by Margaret Thatcher, between pensions and average earnings.

The party says the ?2.7bn bill for the changes would be met through savings from the abolition of the Department of Trade and Industry, another key Lib Dem policy.

Plans would also include making occupational pension schemes "opt out" rather than "opt in" so that employees have to make a conscious decision not to save in the scheme, and a "kitemark" system so employees can check how their company's pension scheme rates.

With pensions - both state and private - shooting up the political agenda, to the extent that fledgling "pensioner parties" have been founded and regular demonstrations are held outside parliament, Lib Dem strategists are hoping to capitalise on the so-called grey vote. Pensioners are statistically much more likely to vote than younger people.

Private pensions are also set to be a key battleground in the election expected next spring, with growing unease among voters following the Equitable Life debacle and the experience of 80,000 workers who lost their pensions when their companies went bust.

The Lib Dems also plan to increase incentives for individuals to save for their old age by reducing means-testing, which has been a vital element in Labour's approach of targeting money for the elderly at the least well-off.

The Lib Dem leader, Charles Kennedy, took the press conference himself, such is the importance the party attaches to the issue, with a proposal to help people get a clearer idea of what income they can expect in their retirement by allowing them to check their future "pension balance" through cash machines. Annual forecasts would also be given to everyone paying into a private pension.

The ?25-a-week boost for the oldest pensioners would eventually be rolled out to all 11 million people receiving the state pension, he promised.

The Lib Dems' pensions spokesman, Steve Webb, said that those with modest savings now effectively pay tax at a rate of 40% on the first ?25 a week of their private pensions.

"Pensions need to be simple, flexible and reliable," said Mr Webb. "So much of pensions is rooted in the industry of the 1960s and the family structure of the 1940s, and we need a pension system that fits with the modern world."