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The proposed state second pension

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  • Philippe Agulnik

Abstract

The UK government has recently proposed radical changes in second-tier pension provision, with the existing State Earnings-Related Pension Scheme (SERPS) being replaced by a new State Second Pension (SSP). This paper sets out how the proposed scheme differs from its predecessor and describes the distributional effects of this reform. It shows that the SSP greatly increases the pension entitlements of low earners while maintaining existing benefit levels for higher earners. However, the higher contributions needed to pay for the new scheme mean that, after taking financing into account, people earning more than around £12,000 a year will lose out. Because of the upper limit to National Insurance contributions for employees, these losses will be greatest for people earning at the contribution ceiling.

Suggested Citation

  • Philippe Agulnik, 1998. "The proposed state second pension," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 409-421, November.
    • Handle: RePEc:ifs:fistud:v:20:y:1998:i:4:p:409-421
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    References listed on IDEAS

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    1. Martin Evans & Jane Falkingham & Katherine Rake, 1999. "Tightropes and Tripwires: New Labour's Proposals and Means-testing in Old Age," CASE Papers 023, Centre for Analysis of Social Exclusion, LSE.
    2. 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.
    3. Gardiner, Karen & Hills, John, 1999. "Policy Implications of New Data on Income Mobility," Economic Journal, Royal Economic Society, vol. 109(453), pages 91-111, February.
    4. 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.
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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