The European Central Bank raised its key interest rate by a quarter-point

The European Central Bank raised its key interest rate by a quarter-point yesterday, taking the level to a three-year high of 2.5 per cent, and left the door open for further increases. to simplify the decision-making process for individuals and help Government to spread the cost of future pensions liabilities."A simplified contracting-out system with attractive rebate levels to stimulate saving should be a crucial part of the new pensions settlement."Stephen Timms, the minister for Pensions Reform, acknowledged there was a need to increase the rebate, but said he believed it would be "responsible to take a cost-neutral approach" whilst the Government was considering plans for reform of the entire UK system."The Commission made a number of recommendations in relation to contracting out and it would be wrong for us to make decisions on this out of the context of our White Paper," he said.. Having explained that an increase of about 40 per cent was needed, the Government responded with an increase of just 4 per cent.As well as aiding final salary schemes, an increase in the rebate would have eliminated the current ambiguity over whether people with money purchase pension schemes should contract in or out.Chris Kenny, the director of life and pensions at the Association of British Insurers, said: "We are very disappointed that the Government has chosen to ignore our detailed arguments."An opportunity has been missed ... The decision on S2P rebates is set to apply for the next five years.The savings industry, whose largest trade bodies had joined together to try and persuade Government to increase the rebates, were fuming at yesterday's news.

London Underground are ready to start a tender process without delay.". The Government hammered another nail into the coffin of final salary pension schemes yesterday, ignoring industry pleas to increase the rebate that scheme members receive for contracting out of the second state pension (S2P). Rebates payable to people who "contract out" of S2P, formerly known as Serps, have plummeted in recent years, leaving final salary schemes to subsidise the shortfall to the tune of about £1.5bn a year. Hundreds of final-salary schemes have closed in recent years due to financial difficulty, and yesterday's decision is expected to ensure more are sent to the wall. Before then, newspaper groups must bid for rights from London Underground and Network Rail.Associated can still bid for these rights but made no comment yesterday on its intentions. It is thought to have paid nearly £5m for the original rights.Ken Livingstone, the London Mayor who has had a long-running battle with Associated, said: "I welcome this decision. It will clear the way for a free afternoon newspaper to be published and distributed on the Tube. The newspaper group has agreed to open up its distribution racks in train and Tube stations to rivals.In theory, a new paper could be available by next month.

The OFT has given Associated until 12 April to "unconditionally and irrevocably" give up its exclusive rights with the train companies.The watchdog found that the 24-hour exclusivity of Associated's deals with Tube and train operators "went beyond what could be objectively justified". In total, Associated believes Metro will have a national circulation of 1.1 million in 16 cities. Kevin Beatty, Associated's managing director, said the OFT had made "no findings against the company". It also protects the Metro franchise, which is to be extended to Liverpool and Cardiff. The company plans to increase Metro's circulation in London by 50,000 to 550,000 each day.