Tony Blair and Gordon Brown are close to reaching a deal which would restore the link between the state pension and earnings, say government sources.
But the Treasury does not want the change until at least 2012, two years after the date recommended by Lord Turner’s commission on pensions, reports BBC News Online.
There is also said to be agreement on raising the state pension age to 68 by 2050.
The Turner report recommended raising the state pension age from 65 to 68 by 2050 to help cope with the growing costs associated with a population that is living longer.
It also called for the state pension to be more generous, with increases linked from 2010 to average wages rather than price inflation.
Work and pensions secretary John Hutton is now said by department sources to be “very optimistic” that most of the report’s recommendations will be implemented, with government insiders saying a deal is close.