- guardian.co.uk, Wednesday November 29 2006 14.09 GMT
The long-awaited pensions bill aims to rejuvenate the current system in an attempt to head off a potential pensions crisis, where too many pensioners need an income from too small a state pot.
A year ago, Sir Adair Turner published a report for the government in which he recommended a list of measures that might help avert the problem.
Among these were the restoration of a link between earnings and state pensions, an increase in the state pension age and the introduction of a national savings scheme, which would see employees automatically enrolled in company pensions. A white paper was subsequently published on pension reform in May.
Today's bill goes some way to following up the proposals to change the pension system. The work and pensions secretary, John Hutton, said the bill was "probably the most radical and far-reaching set of reforms of our pension system since the Attlee Labour government in the 1940s legislated to bring in the modern welfare state we have today".
So what does the bill actually say?
State retirement age to be increased to 68
The state pension age will be increased to 68. The increase will be introduced gradually, with the top age being reached in 2046. People born between April 1960 and April 1968 will be able to retire aged 66. Those born between 1969 and 1977 will retire aged 67, while those born in 1978 will retire aged 68.
The general union, GMB, argued that the move would have a greater impact on people on lower incomes. Naomi Cooke, pensions officer at GMB, said: "In the same month as the government publishes life expectancy figures showing that men in Glasgow die on average at 69, they try to raise the state pension age to 68.
"Increasing the state pension age directly penalises those on the lowest incomes and a Labour government should know better."
Restoring the link between earnings and state pensions
The Thatcher government removed the link between state pensions and earnings in favour of a link to inflation. Campaigners have long fought for the link to be brought back and are pleased the government has finally listened.
However, while the restoration of the link is likely to become inscribed in law, it may not happen just yet. In the Queen's speech it was announced it would be brought back during the next parliament. Charities have argued that any delay is too long and while the measures may help tomorrow's pensioners they leave those people retiring now out in the cold.
A fairer deal for women
The number of years it takes to build up enough national insurance contributions to qualify for a full state pension is to be reduced. The idea is to even things up so that women, who often take time off work to bring up children and therefore make contributions over fewer years than most men, are treated more fairly.
Under the plans, workers will only have to make contributions for 30 years to get a full state pension.
The move is generally a popular one, but has caused some controversy. At present, it appears that people who made extra contributions to bring them up to the old 44-year limit, or 39 for women, are unlikely to get any of that money back.
A "delivery authority" to set up a national saving scheme
The bill proposes a "delivery authority" be put in place to design and plan the new personal savings account system.
A further white paper on the national pensions saving scheme is due before the end of the year, which will outline more detail on the proposed scheme. So far, it is likely to mean employees will be automatically enrolled in workplace pension schemes unless they choose to opt out. Individuals would contribute 4% of their pay and companies would pay in 3%.
