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From Me to You? How the UK State Pension System Redistributes

Author

Listed:
  • Rowena Crawford

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Soumaya Keynes

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Gemma Tetlow

    (Institute for Fiscal Studies)

Abstract

The redistributive objectives of the UK state pension system have often been somewhat ambiguous, and have changed over time as different governments have come and gone. In this paper, we use detailed data on households’ histories of employment, earnings and contributions to the National Insurance (NI) system to examine the degree of intragenerational redistribution achieved by the UK state pension system for the cohort born in the 1930s. We also estimate what redistribution could have been achieved by alternative stylised state pension systems, which approximate the steady-state version of some of the main reforms that have been implemented in the UK over the last 40 years. We find that the majority of state pension spending under all the systems we consider reflects a transfer of money across individuals’ lifetimes, rather than between different individuals in the cohort. Comparisons between the different state pension systems, in terms of the extent of redistribution they imply, depend crucially on the stance taken as to whether or not individuals in couples pool their resources. These findings will be presented at a briefing on 9 September, alongside several other pieces of work which shed light on how financial preparedness for retirement differs across cohorts and important differences within cohorts.

Suggested Citation

  • Rowena Crawford & Soumaya Keynes & Gemma Tetlow, 2014. "From Me to You? How the UK State Pension System Redistributes," IFS Working Papers W14/20, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:14/20
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    File URL: https://www.ifs.org.uk/uploads/publications/wps/WP201420.pdf
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    References listed on IDEAS

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    1. repec:bla:revinw:v:39:y:1993:i:3:p:257-78 is not listed on IDEAS
    2. Rowena Crawford & Cormac O'Dea, 2014. "Cash and Pensions: Have the elderly in England saved optimally for retirement?," IFS Working Papers W14/22, Institute for Fiscal Studies.
    3. Richard Disney, 2004. "Are contributions to public pension programmes a tax on employment? [‘Welfare state and competitiveness’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(39), pages 268-311.
    4. Jonathan Cribb & Carl Emmerson & Gemma Tetlow, 2013. "Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK," IFS Working Papers W13/03, Institute for Fiscal Studies.
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    Cited by:

    1. Antoine BozioBy & Carl Emmerson & Cormac O’Dea & Gemma Tetlow, 2017. "Do the rich save more? Evidence from linked survey and administrative data," Oxford Economic Papers, Oxford University Press, vol. 69(4), pages 1101-1119.
    2. Bercholz, Maxime & Bergin, Adele & Callan, Tim & Garcia Rodriguez, Abian & Keane, Claire, 2019. "A micro-macro economic analysis of pension auto-enrolment options," Papers WP640, Economic and Social Research Institute (ESRI).

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