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Is there a Pensions Crisis in the U.K.?

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  • E. Philip Davis

    (Professor of Economics and Finance, Brunel University, Middlesex, UK; Visiting Fellow, National Institute of Social and Economic Research; Associate Member of the Financial Markets Group at LSE; Associate Fellow of the Royal Institute of International Affairs and Research Fellow of the Pensions Institute at Birkbeck College, London.)

Abstract

The U.K. pension system is traditionally seen as offering a good example to other countries, having features such as low social security pension expenditure and a high coverage of well-financed voluntary private schemes. But recent developments suggest that the model has shown weaknesses. The most pressing current issue is underfunding of defined benefit occupational schemes following the bear market; but there is also the ongoing crisis of mis-selling of personal pensions and the failure of the Equitable Life insurance company. In this paper we seek to investigate whether there is indeed a crisis and what the locus of the difficulty is. We find that there are important longer-term weaknesses of the U.K. system as well as these current difficulties, focusing on social security and private pensions. Pitfalls faced by U.K. policymakers offer important lessons to other countries seeking to set up or expand private pension provision. The Geneva Papers on Risk and Insurance (2004) 29, 343–370. doi:10.1111/j.1468-0440.2004.00292.x

Suggested Citation

  • E. Philip Davis, 2004. "Is there a Pensions Crisis in the U.K.?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 29(3), pages 343-370, July.
  • Handle: RePEc:pal:gpprii:v:29:y:2004:i:3:p:343-370
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    References listed on IDEAS

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    1. Miles, David, 1993. "Testing for Short Termisn in the UK Stock Market," Economic Journal, Royal Economic Society, vol. 103(421), pages 1379-1396, November.
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    Cited by:

    1. Martina Eckardt & Solvig Räthke-Döppner, 2010. "The Quality of Insurance Intermediary Services-Empirical Evidence for Germany," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 667-701.
    2. Michiel Bijlsma & Machiel van Dijk & Marc Pomp & Cora Zonderland, 2005. "Competition in markets for life insurance," CPB Document 96, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Christine Lagoutte, 2006. "Financement des retraites par capitalisation et équilibre des systèmes financiers : le cas du Royaume-Uni," Revue d'Économie Financière, Programme National Persée, vol. 86(5), pages 331-362.
    4. Jacob A. Bikker & Peter J.G. Vlaar, 2006. "Conditional Indexation in Defined Benefit Pension Plans," DNB Working Papers 086, Netherlands Central Bank, Research Department.
    5. Guillen, Montserrat & Jorgensen, Peter Lochte & Nielsen, Jens Perch, 2006. "Return smoothing mechanisms in life and pension insurance: Path-dependent contingent claims," Insurance: Mathematics and Economics, Elsevier, vol. 38(2), pages 229-252, April.
    6. Machiel van Dijk & Michiel Bijlsma & Marc Pomp, 2008. "The price of free advice," Applied Economics, Taylor & Francis Journals, vol. 40(14), pages 1889-1903.

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