Tightropes and Tripwires: New Labour's Proposals and Means-testing in Old Age

This paper analyses the Government's proposals contained in A New Contract for Welfare: Partnership in Pensions. It examines the position of low paid workers and the potential of the proposals to protect individuals from means-tested old age. The paper identifies that the Green Paper's proposals add up to reinventing a new two-stage basic pension but at proposed levels that could extend means-testing to low paid workers. The paper then models the Green Paper's proposals on lifetime incomes of a hypothetical, low-income individual and their partner. Two key features of the proposed basic pension package are argued as problematic. First, the level of payment, and second, lifetime participation rules that prevent comprehensive coverage or tightropes and tripwires, respectively. The paper identifies potential incentive problems, and problems of sustainability. The authors make several suggestions about changes to the proposals that could meet their concerns.