Analysis of pension reform scenarios in a rational world
Current government proposals for reform of the UK pension system are predicated, in part, on the view that simplification of the policy environment will help individuals take responsibility for their own retirement needs. This view currently enjoys widespread public support due to the complexity of the contemporary system of retirement provisions in the UK.
This view currently enjoys widespread public support due to the complexity of the contemporary system of retirement provisions in the UK. Yet, in attempting to simplify the pensions system, it is important not to lose sight of the incentives that are generated by policy alternatives, and their implications for prospective savings and retirement decisions. In this study I consider the long-run incentive effects of policy scenarios based on those set out in the consultation paper A State Pension for the 21st Century, published in April 2011 by the Department for Work and Pensions (DWP, 2011). The report discusses a number of reasons why the results should be treated with a degree of caution, particularly because final DWP policy proposals could differ to the scenarios outlined here.