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Thursday 01st of July 2010
April 13, 2010    

Labour pledges to increase basic state pension

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by Kay Murchie
Labour pledges to increase basic state pension

As the Labour Government’s general election campaign continues, its latest pledge is to increase the basic state pension in accordance with earnings from 2012 - provided the party is re-elected.

The pensions-earnings link was scrapped by Margaret Thatcher thirty years ago and replaced with the retail price inflation index (RPI).

However, with pensions being linked to the RPI, it has meant pensions have risen at a slower rate than the average wage since 1980.

This move is believed to be worth £600 million a year to those claiming a state pension but many have raised concern.

John Ball, head of defined benefit pension consulting at Towers Watson, comments: “Public finances are in much worse shape than they were when the Government said it would have to wait and see if restoring the earnings link in 2012 was affordable.

“The announcement says more about the power of the grey vote than about the outcome of any affordability test,” he added.

In the meantime, Labour’s election manifesto also sees Labour committing to investigate pensioner poverty.

Labour also said it will promote flexible working, and proceed to end default retirement at age 65.

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