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Public pension reform in the United Kingdom: what effect on the financial well-being of current and future pensioners?

Author

Listed:
  • Richard Disney

    () (Institute for Fiscal Studies and University of Nottingham)

  • Carl Emmerson

    () (Institute for Fiscal Studies)

Abstract

Unlike many tax and benefit changes, reforms to public pension programmes take many years to have their full effect. This paper examines the effect of reforms to the public pension programme in the United Kingdom on the state retirement incomes of current generations of pensioners and on the prospective state incomes of future generations of pensioners. We show that, for an individual with lifetime earnings close to male average earnings, the UK pension system is at its most generous to those reaching the state pension age around the year 2000, but that the introduction of the state second pension and the pension credit postpones this peak for individuals on lower incomes and for those with substantial periods out of paid employment spent with caring responsibilities. We also consider how the 'mix' of benefits, particularly between the contributory and income-tested sectors, could change over time, and the impact that this would have on incentives to save for retirement.

Suggested Citation

  • Richard Disney & Carl Emmerson, 2005. "Public pension reform in the United Kingdom: what effect on the financial well-being of current and future pensioners?," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 55-81, March.
  • Handle: RePEc:ifs:fistud:v:26:y:2005:i:1:p:55-81
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    Citations

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    Cited by:

    1. Richard Disney & Carl Emmerson & Matthew Wakefield, 2008. "Pension Provision and Retirement Saving: Lessons from the United Kingdom," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 155-176, November.
    2. 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".
    3. Stefan Traub & Tim Krieger, 2009. "Wie hat sich die intragenerationale Umverteilung in der staatlichen Säule des Rentensystems verändert? Ein internationaler Vergleich auf Basis von LIS-Daten," LIS Working papers 520, LIS Cross-National Data Center in Luxembourg.
    4. Jörg Neugschwender, 2011. "Occupational Welfare Policies and Pension Income Inequalities: Case Studies of Pension Systems in Denmark, Finland, and the United Kingdom," LIS Working papers 561, LIS Cross-National Data Center in Luxembourg.
    5. Jörg Neugschwender, 2015. "Pension Institutions and Income Inequality across European Societies: Denmark, Germany, Sweden, and the United Kingdom," LIS Working papers 627, LIS Cross-National Data Center in Luxembourg.
    6. James Banks & Carl Emmerson & Gemma C. Tetlow, 2014. "Effect of Pensions and Disability Benefits on Retirement in the UK," NBER Working Papers 19907, National Bureau of Economic Research, Inc.
    7. Richard Blundell & Carl Emmerson & Matthew Wakefield, 2006. "The importance of incentives in influencing private retirement saving: known knowns and known unknowns," IFS Working Papers W06/09, Institute for Fiscal Studies.
    8. Tim Krieger & Stefan Traub, 2009. "Wie hat sich die intragenerationale Umverteilung in der staatlichen Säule des Rentensystems verändert? Ein internationaler Vergleich auf Basis von LIS-Daten," Working Papers CIE 24, Paderborn University, CIE Center for International Economics.
    9. Vandeninden, Frieda, 2012. "A Simulation of Social Pensions in Europe," MERIT Working Papers 008, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Raddatz, Claudio & Schmukler, Sergio L., 2008. "Pension Funds And Capital Market Development:How Much Bang For The Buck?," Policy Research Working Paper Series 4787, The World Bank.
    11. James Banks & Carl Emmerson & Gemma Tetlow, 2014. "Effect of Pensions and Disability Benefits on Retirement in the United Kingdom," NBER Chapters,in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 81-136 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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