Commentary: Pensions and Pensions Policy

By Broadbent, Simon; van de Ven, Justin et al. | National Institute Economic Review, July 2005 | Go to article overview

Commentary: Pensions and Pensions Policy

Broadbent, Simon, van de Ven, Justin, Weale, Martin, National Institute Economic Review

The Pensions Commission is to make its recommendations on pension policy reform later this year, in the light of comments on the challenges identified in its first Report. Widespread agreement on the need for such reform is partly a consequence of problems which have already surfaced, such as the insolvency of some pension schemes, moves to curtail benefits and mis-selling scandals. However the main impetus comes from the fact, clearly demonstrated by the Pensions Commission (2004), that for pensioners to enjoy the current relative standard of living in fifty years time will require people either to (i) retire later (ii) save more; or (iii) pay higher taxes. In the Commission's view the key issues are to find a consensus on the appropriate combination of these three, or of the alternative of lower pensioner incomes, and to find ways of bringing about such an outcome. We focus on aspects of such a reform and suggest one measure which could be implemented without further ado.

For many years the British system of a relatively frugal contributory state pension combined with funded occupational and personal pensions appeared relatively successful. Pensioners' incomes grew faster than average earnings, although some people did better than others--anyone relying upon the Basic State Pension (BSP) saw a steady erosion of their position. People who had changed jobs a lot, and many women, also did poorly. In retrospect this 'golden age' seems to have been something of a fool's paradise. Unusually and unsustainably high investment returns (and hence annuity rates) allowed pension schemes to meet their obligations while running up surpluses and even taking contribution holidays. Looking ahead, it must be assumed that real investment returns will be closer to the long-term rate of growth of the economy and that life expectancy will rise and with it the number of pensioners. Any new arrangements will have to embody some combination of the three changes mentioned above.

Pensions and the Government

It may seem self-evident why the Government should prescribe the structure of the pension system in great detail. Pensions are, after all, the largest single item of public expenditure, even before tax incentives to encourage private provision are taken into account. At the very least these resources need to be efficiently deployed. But this requires a clear view of the most basic question: why have a pension system at all? In today's society, people can expect to spend a lengthy period of their lives in retirement. The fact that this is expected, however, means that individuals can presumably plan for it. One may take the view that the issue of when during their lives an individual chooses to spend their income is not very different from the issue of what they choose to spend their money on at any one time. The state does not interfere to any great extent in the latter decision so why should it need a policy over the former?

There are three obvious answers to this question. First, it is not politically feasible for the state to wash its hands of people who reach retirement with inadequate savings or pensions, however clearly they have been urged to save for themselves. The conclusions of the Commission's first report demonstrate the failure of policy that leaves people to make their own arrangements. For more than twenty years, people have known that the Basic State Pension (BSP) was linked to prices rather than wages. The very elderly have seen their pensions fall relative to wages as a result, but have not been in a position to do much about it. People who are now reaching retirement age, however, have had plenty of time to adjust their savings in light of price indexation, and in many cases have not done so. It is possible that they believed (correctly) that the pension regime would become more generous by the time that they reached retirement, as it has done with the introduction of the Pension Credit (PC). …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

Commentary: Pensions and Pensions Policy


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.