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Pension Provision and Retirement Saving: Lessons from the United Kingdom

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  • Richard Disney
  • Carl Emmerson
  • Matthew Wakefield

Abstract

We describe the trajectory of pension reform in the United Kingdom, which has focussed on keeping the cost of public pension programmes down during a period of steady population ageing whilst attempting to maintain an adequate minimum level of income security for low income households in retirement. Instruments for achieving these aims have been to target public benefits on low income households, permitting individuals to opt out of the second tier of the public programme into private retirement accounts, and the use of tax incentives to encourage additional private retirement saving. Frequent reforms to the pension programme raise the question of whether households can make reasonable private retirement saving provision in the light of growing complexity and potential shortcomings in individual decision-making. This paper sheds some light on these issues.

Suggested Citation

  • Richard Disney & Carl Emmerson & Matthew Wakefield, 2007. "Pension Provision and Retirement Saving: Lessons from the United Kingdom," Discussion Papers 07/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:07/01
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    References listed on IDEAS

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    1. Richard Disney & Edward Whitehouse, 1992. "Personal pensions and the review of the contracting-out terms," Fiscal Studies, Institute for Fiscal Studies, vol. 13(1), pages 38-53, February.
    2. Georges de Menil & Robert Fenge & Pierre Pestieau, 2008. "Pension Strategies in Europe and the United States," Post-Print halshs-00754865, HAL.
    3. R Disney & C Emmerson & M Wakefield, 2001. "Pension reform and saving in Britain," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(1), pages 70-94, Spring.
    4. James Banks & Sarah Smith, 2006. "Retirement in the UK," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(1), pages 40-56, Spring.
    5. Milligan, Kevin, 2003. "How do contribution limits affect contributions to tax-preferred savings accounts?," Journal of Public Economics, Elsevier, vol. 87(2), pages 253-281, February.
    6. Richard Disney & Carl Emmerson & Matthew Wakefield, 2007. "Tax reform and retirement saving incentives: evidence from the introduction of stakeholder pensions in the UK," IFS Working Papers W07/19, Institute for Fiscal Studies.
    7. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
    8. 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.
    9. Woojin Chung & Richard Disney & Carl Emmerson & Matthew Wakefield, 2006. "Public policy and retirement saving incentives in the UK," Discussion Papers 06/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    10. Richard Disney & Carl Emmerson, 2005. "Public pension reform in the United Kingdom: what effect on the financial well-being of current and future pensioners?," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 55-81, March.
    11. Richard Disney, 2006. "Household Saving Rates and the Design of Public Pension Programmes: Cross–Country Evidence," National Institute Economic Review, National Institute of Economic and Social Research, vol. 198(1), pages 61-74, October.
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    Citations

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    Cited by:

    1. Paul Gregg, 2008. "UK Welfare Reform 1996 to 2008 and beyond: A personalised and responsive welfare system?," The Centre for Market and Public Organisation 08/196, The Centre for Market and Public Organisation, University of Bristol, UK.
    2. Danzer, Alexander M. & Dolton, Peter & Bondibene, Chiara Rosazza, 2016. "Who wins? Evaluating the impact of UK public sector pension scheme reforms," National Institute Economic Review, National Institute of Economic and Social Research, vol. 237, pages 38-46, August.
    3. Cagri Seda Kumru & John Piggott, 2010. "Should Public Retirement Pensions Be Means-tested?," DEGIT Conference Papers c015_049, DEGIT, Dynamics, Economic Growth, and International Trade.
    4. Richard Disney & Carl Emmerson & Sarah Smith, 2004. "Pension Reform and Economic Performance in Britain in the 1980s and 1990s," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, pages 233-274, National Bureau of Economic Research, Inc.
    5. James Banks & Carl Emmerson & Gemma Tetlow, 2005. "Estimating pension wealth of ELSA respondents," IFS Working Papers W05/09, Institute for Fiscal Studies.
    6. Richard Disney & Carl Emmerson & Matthew Wakefield, 2007. "Tax reform and retirement saving incentives: evidence from the introduction of stakeholder pensions in the UK," IFS Working Papers W07/19, Institute for Fiscal Studies.
    7. M. Asghar ZaidiKlaas de Vos & CentER Applied Research & Tilburg University & The Netherlands, 2002. "Income Mobility of the Elderly in Great Britain and The Netherlands: A Comparative Investigation," Economics Series Working Papers 107, University of Oxford, Department of Economics.

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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