How to change workspace JRE in Eclipse

Question

While creating new Java project in Eclipse I got following warning \"The current workspace uses 1.4 JRE...\"
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Answer 1

The issue where it is compiling with 1.4 but the workspace Preferences Compiler setting is 1.6 seems to be the issue described in this bug:

Bug 499675 - Global compiler settings ignored after restarting, defaults to 1.4 even though 1.8 displayed https://bugs.eclipse.org/bugs/show_bug.cgi?id=499675

where the workaround is to change the workspace setting to a different version number and then back to 1.6. That would enable the workspace to compile with 1.6. To compile with 1.7 you'd need to upgrade eclipse as in BalusC's answer.