The United Kingdom Examining the Switch from Low Public Pensions to High-Cost Private Pensions.
David Blake
Introduction
The United Kingdom is one of the few countries in Europe that is not facing a serious pensions crisis. The reasons for this are straightforward: Its state pensions (both in terms of the replacement ratio and as a proportion of average earnings) are among the lowest in Europe; it has a longstanding funded private pension sector; its population is aging less rapidly than elsewhere in Europe; and it governments have, since the beginning of the 1980s, taken measures to prevent the development of a pension crisis. These measures have involved making systematic cuts in unfunded state pension provisions and increasingly transferring the burden of providing pensions to the funded private sector. The United Kingdom is not entitled to be complacent, however, because there remain some serious and unresolved problems with private-sector provision.
This paper reviews the current system of pension provision in the United Kingdom, describes and analyzes defects in the Thatcher-Major governments’ reforms that brought us to the present system, examines and assesses the reforms of the Blair government, and then identifies the problems that remain unresolved and how those problems might be addressed.
The paper ends with an explanation of how the United Kingdom has been able to introduce changes relatively peacefully when attempts by continental European countries to reform their pension systems have frequently led to riots in the streets.
