Pension reform in the United Kingdom: Increasing the role of private provision?

This paper describes the current UK pension system and both the motivations behind, and the implications of, the direction of reforms seen over the last twenty years. Issues such as the sustainability of the pension system, and the advantages and costs of the increasing reliance on means-tested benefits are discussed. Employees are shown to have a large degree of choice over how much and the form that they save for their retirement. Making appropriate savings decisions is made more difficult by the complexity of the present system and the frequent reforms that have tended to add uncertainty and new complexities. Also discussed are the difficulties faced by the Government as it attempts to expand private pension coverage further down the earnings distribution and eventually increase the proportion of pensioner income that comes from private sources. The paper also describes issues related to the coverage of different types of pension arrangement, their transferability and portability and the potential consequences for competition in the provision of private pensions and labour market flexibility.