It has been described as one of the most pressing issues the Government has had to face. But what has been proposed to solve the country's pensions crisis? Lindsay Jennings reports.

SPEAK to people about pensions and you're likely to get a number of reactions. Merely mention the word to most people under 30 and their eyes get a slightly misted over look about them. Many in their twenties are trying to save to get on the property ladder, the bottom rung of which is at least a foot or ten higher than when their parents were their age. They may also have student debts hanging around their necks, feeling heavier than Mr T's entire collection of gold chains.

At the opposite end of the spectrum are those who have saved all their lives, only to find their pension pot has been reliant on a failing stock market and has dwindled away. In some cases, companies have folded leaving virtually nothing for left for its frugal employees.

With figures suggesting that more than 12 million people over the age of 25 are not saving enough for their retirement, the Government had to take action. Yesterday, it published its White Paper on pensions. Based on the recommendations made by The Turner Commission, the proposals herald the biggest shake-up in the British pensions system in more than 50 years.

We look at what's in the White Paper and how it might affect you.

Q Why do we need a pension review? What's wrong with the old system?

A We're in this position primarily because people are living longer. An ageing population means there are not enough tax payers of working age to fund pensions for everyone. Pension providers are faced with paying for longer periods than they anticipated and the problem is made worse by the falling birth rate.

Successive governments have wanted to encourage people to save so they're not totally reliant on state hand-outs. But the mis-selling scandals in the early 1990s and the way many companies have closed their final salary schemes has left many people looking at other investment opportunities such as property or ISAs. Others have simply not bothered saving at all.

Q Will today's pensioners be affected by the White Paper proposals?

A In a nutshell: No. And that hasn't gone down too well with pensioner groups who have accused the Government of a missed opportunity.

Dot Gibson, vice-president of the National Pensioners Convention, says: "The Government's failure to address the issues of pensioner poverty, unpopular means testing and the plight of five million existing women pensioners is the biggest whitewash of older people in the history of social policy." Essentially, only those who are aged under 47 will be affected by the proposals.

Q I've heard the pension review will mean a better deal for women. How exactly?

A Under the current system, carers of relatives or women who take career breaks to look after children are missing out on the National Insurance contributions vital to make up the full state pension. As a result, only 30 per cent are entitled to a full state pension when they retire.

Says Daniel Laws, independent financial advisor and pensions specialist at BiB Financial Services in Darlington: "In the past, it used to be you needed a maximum of 49 years of National Insurance contributions. To get a full state pension, you had to have 90 per cent of your working life as contributions. Under the White Paper they're saying you need 30 years of contributions to get a maximum state pension". But there is no exact date as to when it will come into force.

Q What's the National Pensions Savings Scheme (NPSS)? Will I be forced to join or penalised if I opt out of the scheme?

A From 2012, people will be enrolled into the low-cost national savings scheme. People will have the chance to opt out of the scheme and won't be penalised if they do. If they do nothing, they will be automatically enrolled. If you're in the scheme, you'll have to contribute four per cent of your salary for those who earn between £5,000 to £33,000, with your employer contributing three per cent and tax man one per cent.

Q Is everyone a winner then when it comes to the savings plan?

A Not exactly. Businesses are concerned that it will pick up an unexpected £2.6bn bill for the NPSS. They have accused the Government of being misguided if they think businesses - particularly small ones - can absorb the costs of the proposals.

Andrew Sugden, policy director at the North East Chamber of Commerce, says: "Under these proposals, employers face three options - absorb the costs themselves, pass them on to their customers or pass the cost back to employees through their wage packets.

"It's unlikely that companies can absorb the costs and equally unlikely that they will shift the burden to customers, so their employees are likely to see their salaries pegged back to pay for the extra pensions contributions."

But the Government has said that firms which already offer a pension scheme on an auto-enrolment basis that is as generous as the NPSS will not be forced to anticipate. It has also agreed to give some support for small businesses. But details have yet to emerge.

Q The Government has restored the earnings link. But what does this mean?

A This does appear to be the good news bit. The value of the state pension has become increasingly eroded over the years because it has been linked to the retail prices index rather than earnings for the past 20 years.

The earnings link is likely to be restored by 2012 and the Government says that by 2050, the state pension - currently £84.25 per week for a full state pension - will be worth twice as much as it would have been had it been still linked to prices.

Says Daniel Laws: "In the past, 'prices' have not grown in line with earnings and therefore the gap has widened over time resulting in many pensioners living on the poverty line. But this will represent real increases in the pension rate."

Q Will the second state pension - earnings-related benefit paid on top of the basic payment - be included in the changes?

A Yes. The upper limit on earnings, which count towards workers' entitlement to the second state pension, is being capped so that as average earnings rise, everyone will become eligible for the same flat-rate payment. This is expected to happen by about 2030.

Q What if I want to retire early? Can I kiss goodbye to retiring at 50 then?

A Actually the Government has already changed the rules so that people will only be able to access their personal pensions from the age of 55 as opposed to 50 from 2010. Also from 2020, the state pension age for women will be increased to 65, bringing women in line with men.

Under the White Paper proposals, the state pension age for men and women will then increase further to 66 in 2024; 67 in 2034 and 68 in 2044.

Q How worried should I be about having enough to retire on?

A Even if you can't afford to put any money into saving towards a pension, it will still help if you have an idea about your financial future, says Daniel Laws.

"The biggest thing I find is people who put their head in the sand and don't think about pensions.

"But regardless of what circumstances someone's in now, the biggest thing to do is to review your current pension provision, make an assessment of what you want in the future and how you plan to make that provision.

"Whether you take action or not is irrelevant, but you know what problems you're going to face if you don't."

*For more information on the what the pensions changes might mean for you, log onto ww.thepensionservice.co.uk or call 0845 6060265.