Report (R82)

A single-tier pension: what does it really mean?

Date: 11 July 2013
Publisher: Institute for Fiscal Studies
DOI: 10.1920/re.ifs.2013.0082

A significant reform of the UK’s state pension system is currently being enacted. From 2016–17, the basic state pension and state second pension will be replaced by a new single-tier pension for everyone below the state pension age (SPA). This will bring an end to earnings-related state pension accrual in the UK. This marks the latest step on a long, tortuous and rather circular journey – a journey that started in the early 1970s with a basic state pension worth about £145 a week (in current earnings terms) and that has finally ended up in much the same place. The major difference between the 1974 system and the proposed new system is that the new system will be essentially universal, with considerably more extensive crediting of unpaid activities than was available in 1974.

We have been able to use a unique data set combining lifetime National Insurance contribution histories with detailed micro data from the English Longitudinal Study of Ageing to look at who will benefit from these reforms among the first generations of those reaching SPA from 2016.

This work has been made possible by funding from the Joseph Rowntree Foundation, with co-funding from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy.

An online appendix to accompany this document can be viewed here.