Fiscal effects of reforming the UK state pension system
The fiscal and distributive impacts of three reforms to the social security pension system in the UK are evaluated. All three reforms are designed to increase the retirement age by changing the incentive structure underlying the pension system. The first increases the state pension age by three years. The second introduces an actuarial adjustment to retirement both before and after age sixty five allowing deferral to age 70. The final reform adapts the second reform to include a cap and a floor so as to mirror more closely the existing state pension scheme in the UK. Using a transition model of retirement, the simulations show that increasing the state pension age leads to a lower level of expenditure on the state pension, which is only partially offset through increased state spending on both means-tested income support and disability benefit (invalidity benefit). Employee national insurance receipts are also directly increased through the increase in the state pension age. The increase in retirement ages would also lead to an increase in government revenues arising from increased income tax and employee and employer national insurance contributions. As a result there would be lower levels of government borrowing (or larger government surpluses) than under the base system.
|Date of creation:||01 Jul 2003|
|Date of revision:|
|Contact details of provider:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.uk
More information through EDIRC
|Order Information:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Blundell & Costas Meghir & Sarah Smith, 2004. "Pension Incentives and the Pattern of Retirement in the United Kingdom," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 643-690 National Bureau of Economic Research, Inc.
- Richard Blundell & Paul Johnson, 1997. "Pensions and Retirement in the UK," NBER Working Papers 6154, National Bureau of Economic Research, Inc.
- Richard Disney & Sarah Smith, 2002.
"The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom,"
Royal Economic Society, vol. 112(478), pages C136-C152, March.
- Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," CeRP Working Papers 17, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- 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.
- James Banks & Sarah Smith, 2006.
"Retirement in the UK,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 22(1), pages 40-56, Spring.
- Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages C153-C170, March.
- Richard Disney & Costas Meghir & Edward Whitehouse, 1994. "Retirement behaviour in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 15(1), pages 24-43, February.
- Stock, James H & Wise, David A, 1990.
"Pensions, the Option Value of Work, and Retirement,"
Econometric Society, vol. 58(5), pages 1151-80, September.
- James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:03/13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emma Hyman)
If references are entirely missing, you can add them using this form.