Pension Crisis in the United Kingdom

By

ACKNOWLEDGEMENT

I would like to thank my supervisor for supporting me throughout my project and giving his valuable suggestions. Finally thanks to all my friends and family for their utmost support and inspiration.

DECLARATION

I, (), would like to declare that all contents included in this dissertation stand for my individual work without any aid, & this dissertation has not been submitted for any examination at academic as well as professional level previously. It also represents my own views & not essentially the ones associated with university.

Signed __________________ Date _________________

ACKNOWLEDGEMENTii

DECLARATIONiii

LITERATURE REVIEW1

Theoretical Framework1

Overview of U.K Pension System1

Participation Decision of Employees in State Second Pension3

Occupational Pension3

DC Personal Pension Plan in the United Kingdom4

Personal Pension Plan4

Third Tier of U.K Pension System5

Comparing Occupation Pension and Personal Pension Schemes5

Pension Plan for Widow or Widower6

Examination of Pension Trend in the United Kingdom6

U.K Current Economy7

Current Pension Crises in the United Kingdom7

Past Literature on Pension Policies8

Evidence from Other Countries8

Public Vs Private Pension Debates9

Debt Level of Graduating Students10

Summary10

REFERENCES12

LITERATURE REVIEW

Theoretical Framework

The current study is based on the ongoing pension crisis and its impact on various aspects of the economic conditions of the United Kingdom. The pension crisis in the United Kingdom has been discussed by the government authorities on large extent. This pension crisis that is going on in other parts of the world as well has mainly occurred due to the economic downturn in the past years. Different past studies on the Pension schemes have been carried out that takes into account the pension plans and the participation of employees in it.

Overview of U.K Pension System

Pension is a way to protect retirees against risks, such as those caused by demotion, layoff and bad economic times. This section reviews the structure of the UK pension system. The UK pension system consists of three tiers. The first two are mandatory, and the third is voluntary. The first tier is a government administered pension scheme which is called the Basic State Pension (BSP). It is a flat rate pension paid to retired workers who made the required National Insurance contributions (NICs) during qualifying years. Individuals who do not have other resources of income may receive mean-tested benefits from pensioners.

Table 1: Schema of U.K Pension Scheme

Source: Disney et al (2001)

The second tier mandatory pension is to provide an extra pension besides BSP. This level of pension consists of a state pension and a private pension. Before 2002, the State Second Pension (S2P) was called the State Earnings-Related Pension Scheme (SERPS). This is a form of state pension that depends on the amount that an individual earns and the additional NICs an individual makes. To be eligible for S2P, the individual has to be employed and earn above £95 per week.

Participation Decision of Employees in State Second Pension

If an employee chooses not to participate in S2P, she is free to contract out into a private pension scheme, which includes occupational pensions, personal pensions and stakeholder pensions. For low income individuals, S2P may be seen as ...