UK/ITALY - James Purnell has been appointed the new UK secretary of state for work and pensions, while Italian pension reforms could be under threat after prime minister Romano Prodi resigned.

Purnell took on the role of work and pension secretary late yesterday afternoon, after former minister Peter Hain resigned following confirmation the Metropolitan Police had started an investigation into the funding of his failed deputy leadership campaign.

Following the cabinet reshuffle, Purnell, who was minister for pensions reform at the Department for Work and Pensions from May 2006 until June 2007, confirmed Mike O'Brien would remain as minister in charge of pensions reform.

However, he also announced Stephen Timms, who has twice held the role of pensions minister - most recently between May 2005 and May 2006 - would be returning to the DWP as minister of state for employment and welfare reform.

Previously secretary of state for culture, media and sport, Purnell said he planned to "deepen the reform of the welfare and pensions systems".

"My aspirations are to ensure everyone has the chance to self-reliant in old age," he added.

Commenting on the appointment, Chris Grayling, shadow secretary of state for work and pensions for the opposition Conservative Party, said he hoped Purnell would be "able to take a firm grip on a department that is clearly losing its way", particularly as the latest Pensions Bill is still only at the Committee stage and is facing continuing criticism over the issues of means-testing and auto-enrolment for group personal pensions.    

Meanwhile, the future of the recently announced Italian pension reforms could be in doubt after prime minister Romano Prodi resigned from office by losing a vote of no confidence in the Italian senate by 156 votes to 161.

The reforms outlined in the Welfare Protocol, published at the same time as the Budget, have been criticised by consultants as "watered down" versions of the original proposals put forward by former prime minister Silvio Berlusconi in 2005. (See earlier IPE story - Italian annuity review delayed until 2010).

Following Prodi's resignation, president Giorgio Napolitano has the choice of employing a caretaker government or calling a snap general election which, it is believed, would favour Berlusconi and his Forza Italia party and could possibly trigger further pension reform changes.

Livio Mocenigo, managing consultant of Watson Wyatt Milan, has previously highlighted to there is a "completely different approach" to pensions depending on the government, as right-wing politicians, such as Berlusconi, are "more liberal in interfering in pensions" as they recognise the financial burden to the state.

On the other hand, centre-left politicians, who are currently in power, are closer to the unions and recognise the original pension reforms are "not politically advisable", which in turn makes the whole issue a "political hot potato".

Mocenigo said it is now a matter of observing what happens next, but warned while "any government" continues to make changes to pensions, both employers and workers should think more about saving for their own retirement.

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