Briefing Note (BN36)

Achieving simplicity, security and choice in retirement? An assessment of the government's proposed pensions reforms

Date: 02 April 2003
DOI: 10.1920/bn.ifs.2003.0036
On 17 December 2002, the government published a Department for Work and Pensions Green Paper about ѷorking and saving for retirementұ and a set of Inland Revenue proposals for reforms to the tax treatment of private pensions.2 Of the options explored in the two papers, it is claimed that Ѵhese proposals for better information, simpler pensions, simplified tax treatment, better protection and more flexible retirement are designed to enable people to make their own choices for retirement' (DWP Green Paper, Summary, 66, 10).

The perceived need for yet more reforms to the UK pension system seems to stem from the governmentҳ belief that Ѱerhaps 3 million people are seriously under-saving (or planning to retire too soon)' and that ѡ further group of between 5 and 10 million people may want to consider saving more or working longer' (DWP Green Paper, 3, 16, 36). In this Briefing Note, we discuss whether or not the proposed reforms are likely to help individuals to make choices about how to provide for their retirement that are appropriate to their circumstances. We focus particularly on whether or not the proposals might prompt those individuals who are not thought to be providing sufficiently for their retirement to save more each year or to retire at an older age than might otherwise have been the case. This would help alleviate concerns about underprovision.

The structure of our discussion is as follows. Section 2 describes the main proposed reforms. Section 3 discusses whether they are likely help individuals to make saving decisions that are appropriate to their circumstances. Section 4 looks at how the reforms might affect retirement ages. Section 5 concludes.