Towards a ‘balanced’ approach to pensions reform? Individuals, the
state and employers in the restructuring of post-retirement income
in the UK

Paul Bridgen and Traute Meyer


This paper tests the feasibility of individual saving as a solution to the pensions
crisis and, heeding the Pensions Commission’s call for a ‘balanced’ approach to
the UK’s problems, investigates the effect on individual savings rates of changes
in state and occupational provision: ie the re-introduction of the Basic State Pension
earnings link and a return to an average pension contribution of 8 % for those
employers currently providing occupational pensions. The paper is based on a
series of micro-simulations of the pension entitlements of a selection of illustrative
‘risk biographies’, which are founded upon a critique of similar calculations undertaken
by the DWP and Pensions Commission.

The paper shows that:
1. The introduction of typical risks (eg care responsibilities, unemployment, early
retirement) to individual life biographies, and the use of an adequacy standard based
on relative poverty, significantly increases the rate of saving required to secure an
adequate income in retirement in comparison with the savings rates outlined by the
DWP and Pensions Commission.
2. A relatively small change in the current policies of the state and some employers has
the potential to make the prospect of an increased reliance on individual savings a
more feasible prospect.
3. Greater intervention by the state and/or employers would nevertheless be required to
cater for those with greater periods out of the workforce and/or working in sectors
uncovered by occupational provision.

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