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Should the basic state pension be a contributory benefit?

Author

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  • Paul Johnson
  • Gary Stears

Abstract

The basic state retirement pension is payable irrespective of means but it is a contributory benefit, not a universal benefit. Individuals who do not have enough National Insurance contributions when they reach state pension age are not entitled to a full state pension. They may receive a proportion of the pension or just the dependant’s addition to a spouse’s pension. This reflects the fact that the pension system in the UK, and the system of unemployment and sickness benefits, were designed around the contributory principle. As Dilnot, Kay and Morris (1984) pointed out in their comprehensive review of social security policy, ‘The Beveridge report took the contributory principle extremely seriously. Contributions were to be levied on an actuarially calculated basis to reflect the benefits received’. But ‘the retreat from this principle has been comprehensive ... The National Insurance fund was reduced to meaningless accounting and the actuarial link between contributions and benefits abandoned’. In this strong sense, we have never operated a contributory principle.

Suggested Citation

  • Paul Johnson & Gary Stears, 1996. "Should the basic state pension be a contributory benefit?," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 105-112, February.
    • Handle: RePEc:ifs:fistud:v:17:y:1996:i:1:p:105-112
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    File URL: http://www.ifs.org.uk/fs/articles/fsjohnson&stears.pdf
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    Cited by:

    1. Philippe Agulnik, 1998. "The proposed state second pension," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 409-421, November.
    2. Richard Blundell & Paul Johnson, 1999. "Pensions and Retirement in the United Kingdom," NBER Chapters, in: Social Security and Retirement around the World, pages 403-435, National Bureau of Economic Research, Inc.
    3. Judith Freedman & Emma Chamberlain, 1997. "Horizontal equity and the taxation of employed and self-employed workers," Fiscal Studies, Institute for Fiscal Studies, vol. 18(1), pages 87-118, February.
    4. Stuart Adam & Glen Loutzenhiser, 2007. "Integrating Income Tax and National Insurance: an interim report," IFS Working Papers W07/21, Institute for Fiscal Studies.
    5. Craig P. Aubuchon & Juan Carlos Conesa & Carlos Garriga, 2011. "A primer on social security systems and reforms," Review, Federal Reserve Bank of St. Louis, vol. 93(Jan), pages 19-35.

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