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Welfare Reform on the Web (June 2003): Pensions - UK

£15 BN BLACK HOLE IN LOCAL AUTHORITY PENSION FUNDS

R. Bruce and S. Targett

Financial Times, April 28th 2003, p.6

Local authority pension funds have a £15 bn black hole under new accounting roles, according to Pinter Southall, an actuarial consultancy. Many schemes could be worse off than large corporate pension schemes that have closed to new members.

AN AGE-OLD PROBLEM

M. Conrad

Public Finance, Apr. 4th - 10th 2003, p. 24-25

Argues that in order to prevent widespread pensioner poverty in the future, the government needs to reform and improve the state pension system instead of relying on occupational schemes or individual saving. This could be done by merging the present standard state pension, the fledgling Second State Pension, and various means - tested top-us into a single basic pension that would offer everyone a decent income. This could be financed by raising the retirement age from 65 to 67.

BALANCING ACT

D. Walker

Public Finance, Apr. 4th - 10th 2003, p. 26-28

Defined benefit occupational pension schemes based on employees' final salaries are dying out in the private sector but continuing in the public services. This has not yet provoked public opposition, but taxpayers may revolt against perceived favoured treatment of state sector workers in the future.

IMPROVING SERVICE QUALITY: ACTION IN RESPONSE TO THE INHERITED SERPS PROBLEM

National Audit Office

London: TSO, 2003 (House of Commons Papers, session 2002/03: HC 497)

In August 2000 the Committee of Public Accounts reported on the failure by the then Department of Social Security over many years to inform the public correctly about the reduction from 100% to 50% in the amount of State Earnings Related Pension that could be inherited by a widow or widower on the death of a spouse. Reports on efforts to correctly inform the public about their entitlements and to improve the Department's communication system generally.

PRIVATISING PROVISION AND ATTACKING POVERTY? THE DIRECTION OF UK PENSION POLICY UNDER NEW LABOUR

T. Clark and C. Emmerson

Journal of Pension Economics and Finance, vol. 2, 2003, p. 67-89

In line with previous Conservative governments, New Labour has continued to drive forward the privatisation of pension provision. It has complimented to this drive with a new focus on reducing pensioner poverty. The government has used three key policies to achieve these aims:

  • it has restructured the non-means tested state pension scheme to make it more generous to lower earners;
  • it has introduced stakeholder pensions in order to encourage middle earners to save in a private pension scheme;
  • it has substantially increased the generosity of means-tested benefits for the poorest.

Authors note that this may reduce incentives to save.

WARNING OVER CLOSURE OF FINAL SALARY SCHEMES

N. Timmins

Financial Times, April 29th 2003, p. 6

A wave of closures of final salary schemes to existing members in on the way. Stewart Ritchie, head of pensions development at Scottish Equitable said "I think we will see many more schemes stop accrual for existing members, especially in mature industries". A growing member of pensions experts argue that closing schemes to new members does not significantly reduce the big financial deficits that many pension funds face.

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