Individualising Pension Provision in the UK

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					Individualising Pension
  Provision in the UK

       Barbara Waine,
 Honorary Senior Research
           Fellow,
 Institute of Applied Social
           Studies,
 University of Birmingham
THE FOCUS OF THE PAPER


The drive towards the introduction
 of second tier individualised
 pension provision in the UK since
 the 1980s via Personal Pensions,
 Stakeholder Pensions and the
 proposed Personal Accounts
         Three key topics
Changes in UK pension regime from
the mid -1980s

Experience of Personal Pensions and
Stakeholder Pensions

Personal Accounts – are they the
answer?
 UK operates with a basic state pension
        and an additional pension
   -Employer Sponsored Occupational
                Schemes
  -State earnings related scheme (from
                  1961)
 -Personal Pensions (PP) introduced by
        the Conservatives in 1986
 - Response of the Labour Government
-Introduction of the Stakeholder Pension
                  (SHP)
Justification for the PP and SHP

Increasing cost of state additional
pension in the context of an ageing
population

Changing labour market

Personal ownership and independent
provision
   Characteristics of PP and SHP

 Pension linked to contributions paid by
 employer and employee

 Administrative costs set against
 contributions

 Accumulated fund used to purchase an
 annuity


Problems can arise at each stage
Did PP / SHP encourage saving for
 retirement ?

  PP initial success BUT mis-selling
  SHP ‘limited effect’ possibly reflecting lack of
  trust
  Conclusion:
no substantial evidence that these forms of
  individualised pension provision have or will
  improve the pension entitlements of the
  majority of contributors
 Pensions Commission 2005
  advocated National Pensions
  Saving Scheme
 Security in Retirement:

  Towards a New Pensions
  System (2006)
 Personal Accounts (PAs)

  from 2012
   Will PAs be more successful
    than the PP and the SHP?
On the positive side
  Automatic enrolment
  Minimum contribution level
  including employer’s contribution
  Proposed cap on Annual
  Management Charges of 0.3%
  Combination of basic state
  pension and PA could give lifetime
  median earner who started to save
  at 30 a replacement rate of 45%
BUT
 PA is a defined contribution/money
 purchase scheme

 Can the management charges be
 capped at the intended level

 Relationship with real lives
A full copy of this paper is available
                from :

Barbara Waine

E:mail address:


b.waine@bham.ac.uk