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The Earnings-Related State Pension, Indexation and Lifetime Redistribution in the U.K

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  • Creedy, John
  • Disney, Richard
  • Whitehouse, Edward

Abstract

The redistributive impact of the U.K. state pension scheme is examined. Benefit-cost ratios are calculated using individual lifetime earnings profiles constructed for a cohort of men drawn from cross-section data. The scheme is investigated at maturity and revenue neutrality is imposed in order to isolate the intragenerationally redistributive effects of the pension scheme. The results suggest that differences in returns to the pension scheme are driven by differential mortality, which outweigh the redistributive effect of the two-tier benefit structure. Various reforms of the pension scheme are then simulated, and solved for revenue neutrality. The results suggest that a great deal of care is needed in formulating reforms if redistributive objectives are to be achieved. Copyright 1993 by The International Association for Research in Income and Wealth.

Suggested Citation

  • Creedy, John & Disney, Richard & Whitehouse, Edward, 1993. "The Earnings-Related State Pension, Indexation and Lifetime Redistribution in the U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 257-278, September.
    • Handle: RePEc:bla:revinw:v:39:y:1993:i:3:p:257-78
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    Citations

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    Cited by:

    1. Joan Gil & Guillen López-Casasnovas, "undated". "Redistribution in the Spanish pension system: An approach to its life time effects," Working Papers 99-16, FEDEA.
    2. Rowena Crawford & Soumaya Keynes & Gemma Tetlow, 2014. "From Me to You? How the UK State Pension System Redistributes," IFS Working Papers W14/20, Institute for Fiscal Studies.
    3. Sara Flisi & Marcello Morciano, 2011. "Trends and dynamics in the Italian labour market. An empirical evaluation using RFL data, 1993-2007," Center for the Analysis of Public Policies (CAPP) 0091, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    4. Richard Disney & Paul Johnson & Gary Stears, 1998. "Asset wealth and asset decumulation among households in the Retirement Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 153-174, May.
    5. Richard Disney & Carl Emmerson & Sarah Smith, 2004. "Pension Reform and Economic Performance in Britain in the 1980s and 1990s," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, pages 233-274, National Bureau of Economic Research, Inc.
    6. Meghir, Costas & Whitehouse, Edward, 1997. "Labour market transitions and retirement of men in the UK," Journal of Econometrics, Elsevier, vol. 79(2), pages 327-354, August.
    7. Hupfeld, Stefan, 2009. "Rich and healthy--better than poor and sick?: An empirical analysis of income, health, and the duration of the pension benefit spell," Journal of Health Economics, Elsevier, vol. 28(2), pages 427-443, March.
    8. Dennis Fredriksen & Nils M Stølen, 2017. "Life Time Pension Benefits Relative to Life Time Contributions," International Journal of Microsimulation, International Microsimulation Association, vol. 10(2), pages 177-207.
    9. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany.
    10. James Banks & Carl Emmerson, 2000. "Public and private pension spending: principles, practice and the need for reform," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 1-63, March.
    11. Dennis Fredriksen & Nils Martin Stølen, 2015. "Life time pension benefits relative to life time contributions," Discussion Papers 825, Statistics Norway, Research Department.
    12. Turalay Kenc & William Perraudin, 1997. "European pension systems: a simulation analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 18(3), pages 249-277, August.
    13. Philippe Agulnik, 1998. "The proposed state second pension," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 409-421, November.
    14. Aziz, Omar & Gemmell, Norman & Laws, Athene, 2013. "The Distribution of Income and Fiscal Incidence by Age and Gender: Some Evidence from New Zealand," Working Paper Series 18785, Victoria University of Wellington, Chair in Public Finance.
    15. Christina Behrendt, 1999. "Private Pensions - A Viable Alternative? Distributive Effects of Private Pensions in a Comparative Perspective," LIS Working papers 220, LIS Cross-National Data Center in Luxembourg.
    16. Ayfer Karayel, 2006. "The intragenerationally redistributive effects of the retirement insurance scheme in Turkey before and after the 1999 reform," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 441-448.
    17. Guillem López & Joan Gil, 1997. "Life-time redistribution effects of the Spanish public pension system," Economics Working Papers 242, Department of Economics and Business, Universitat Pompeu Fabra.

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