Public Pension Reform in the United Kingdom: What Effect on the Financial Well-Being of Current and Future Pensioners?*


  • *

    Financial support from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy at IFS (grant number M535255111) is gratefully acknowledged. The authors thank Stuart Adam, Mike Brewer, Gemma Tetlow and Matthew Wakefield for useful assistance and comments on earlier drafts. Any errors and all opinions expressed are those of the authors.


Unlike many tax and benefit changes, reforms to public pension programmes take many years to have their full effect. This paper examines the effect of reforms to the public pension programme in the United Kingdom on the state retirement incomes of current generations of pensioners and on the prospective state incomes of future generations of pensioners. We show that, for an individual with lifetime earnings close to male average earnings, the UK pension system is at its most generous to those reaching the state pension age around the year 2000, but that the introduction of the state second pension and the pension credit postpones this peak for individuals on lower incomes and for those with substantial periods out of paid employment spent with caring responsibilities. We also consider how the ‘mix’ of benefits, particularly between the contributory and income-tested sectors, could change over time, and the impact that this would have on incentives to save for retirement.