A single-tier pension: what does it really mean? - The Institute For ...
A single-tier pension: what does it really mean? - The Institute For ...
A single-tier pension: what does it really mean? - The Institute For ...
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
5. Long-Run Effect of the Proposed<br />
Reforms on Pensioner Incomes<br />
In this chapter, we attempt to clarify the long-run impact of the proposed<br />
reforms. <strong>The</strong> important distinction we draw between the ‘long-run’ effect of the<br />
policy (in this chapter) and the ‘short-run’ effect (discussed in Chapter 4) is<br />
between the effects on those who have spent most of their working lives under<br />
the S2P system (‘long-run’) and those who had a significant period under the<br />
SERPS system (‘short-run’). Individuals who started their working lives in 2002<br />
or later (born in 1986 or later) will have spent their entire working lives under<br />
the S2P system, as this was introduced in 2002. This group can, therefore,<br />
certainly be considered as falling w<strong>it</strong>hin our long-run analysis. In add<strong>it</strong>ion, our<br />
conclusions on the long run will also apply to those earlier cohorts who will have<br />
spent a large proportion of their working life under the current system, including<br />
those expecting to accrue at least 31 years of cred<strong>it</strong>able activ<strong>it</strong>ies between 2002<br />
and their SPA. This latter group could include individuals born as early as 1966,<br />
depending on their work histories.<br />
<strong>For</strong> many of our illustrations, we focus on individuals who were aged 16 in 2002;<br />
these people were born in 1986 and will reach SPA in 2054. We examine this<br />
group because they are the first group to have spent their entire working lives<br />
under the S2P system. This group would also spend the vast major<strong>it</strong>y of their<br />
working lives under the proposed system, if <strong>it</strong> is implemented, as currently<br />
planned, in April 2016.<br />
This chapter describes how incomes in retirement (from both state <strong>pension</strong>s and<br />
<strong>mean</strong>s-tested benef<strong>it</strong>s) would differ under the current and proposed systems in<br />
the long run. Sections 5.1–5.3 focus solely on state <strong>pension</strong> income, while Section<br />
5.4 considers <strong>what</strong> impact the proposed reforms will have on income from<br />
<strong>mean</strong>s-tested benef<strong>it</strong>s. Section 5.5 provides a summary.<br />
5.1 How would the level of state <strong>pension</strong> income<br />
received at state <strong>pension</strong> age compare?<br />
Table 3.1 indicated that the vast major<strong>it</strong>y of people who would accrue<br />
ent<strong>it</strong>lement to the proposed <strong>single</strong>-<strong>tier</strong> <strong>pension</strong> would also accrue ent<strong>it</strong>lement to<br />
both the BSP and the S2P under the current system. 51 In this section, we focus on<br />
how accrual of both BSP and S2P compares w<strong>it</strong>h accrual of <strong>single</strong>-<strong>tier</strong> <strong>pension</strong>.<br />
51 Of those getting a qualifying year in 2011, 72% got them via class 1 contributions, which would<br />
also earn S2P ent<strong>it</strong>lement; 18% accrued a qualifying year via cred<strong>it</strong>s, and many of these people<br />
would also have earned a qualifying year to S2P; and 4% accrued a qualifying year through a<br />
combination of cred<strong>it</strong>s and class 1 contributions. Source: DWP 1% sample of the National<br />
Insurance Recording System (NIRS2).<br />
48<br />
© Inst<strong>it</strong>ute for Fiscal Studies