Pension reform in the UK : evaluating retirement income policy
This thesis analyses the effects of current and proposed pension policies for the UK, and critically assesses the arguments for different forms of intervention. It aims to contribute to the pension reform debate in four main ways. First, it presents an original typology of four 'ideal type' pension systems - targeting, basic income, social insurance and compulsory saving - which allows the plethora of different reform proposals to be grouped into manageable bundles, and brings out the key choices facing pension reformers. Second, it aims to make the debate better informed by providing estimates of future pensioner incomes and fiscal sustainability using the relatively new techniques of dynamic microsimulation and generational accounting. In particular, an extended version of the dynamic model PENSIM is used to project pensioner incomes in 2066. Third, it provides an assessment of one particular pension reform - the replacement of the State Earnings-Related Pension Scheme by a new State Second Pension - through describing the rationale for and effects of the new scheme. Finally, it adds to broader theoretical debates about the rationale for, and effectiveness of, different forms of retirement income provision, supplementing the economics and social policy literatures on the role (if any) for compulsory earnings-related pensions and the trade-off between incentives and redistribution. The analysis shows that the UK is an exceptional case. In contrast to most developed countries distributional concerns rather than cost dominate. The government's reforms will do relatively little to improve these distributional outcomes. This reflects the fact that, although the government (correctly) reject compulsorily linking benefits to earnings, connections between entitlements and contributions have not been severed entirely. This thesis argues that it is this linkage which undermines current policy, and that future reforms should move away from the idea of pensions as insurance towards a more rights-based approach.