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Privatising provision and attacking poverty? The direction of UK Pension Policy under new Labour

Published online by Cambridge University Press:  01 April 2003

TOM CLARK  and
CARL EMMERSON
TOM CLARK
Affiliation:
Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE (e-mail: Carl_Emmerson@ifs.org.uk)
CARL EMMERSON
Affiliation:
Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE (e-mail: Carl_Emmerson@ifs.org.uk)
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Abstract

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This paper analyses the thrust of the UK Government's pension reforms in the context of the system they inherited. The reforms represent continuity with what went before in seeking to continue the privatisation of pension provision, but herald a new emphasis on pensioner poverty reduction. There is a clear broad strategy even though not all of the reforms fit obviously within it – a generous means-tested system, extensive private provision and a diminished contributory pension. In the long term, this strategy has advantages in terms of containing public sector liabilities, but involves further downgrading the contributory principle. It will also affect the incentive to save for many individuals. Individuals currently on means-tested benefits will be able to keep more of their savings as a result of the reform. But those currently outside the means-tested benefit regime who expect to be brought into it as a result of the reforms will face a diminished incentive to save.

Type
Research Article
Information
Journal of Pension Economics & Finance , Volume 2 , Issue 1 , March 2003 , pp. 67 - 89
Copyright
© 2003 Cambridge University Press

Footnotes

Financial support from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy at IFS (grant number M535255111) is gratefully acknowledged. Responsibility for the interpretation of data, and any subsequent errors, is that of the authors alone. We thank seminar participants at the conference on ‘Retirement pensions schemes’ in Bordeaux, 19th September 2002, Richard Disney and an anonymous referee for useful comments that have improved the paper greatly.