Microsimulation and Policy Debate: A Case Study of the Minimum Pension Guarantee in Britain, by A.B. Atkinson and H. Sutherland

This excellent paper, published by the Microsimulation Unit in Cambridge, seeks to explore the relationship between microsimulation and policy discussion through a case study. The very topical issue chosen is the current debate over the reform of the state pension system, specifically Professor Atkinson’s proposal for a minimum pension guarantee (MPG). The microsimulation model, POLIMOD, is used to examine the implications of the reform, including its costing. Starting from the assumption that a rise in the basic pension is ruled out on political grounds, the MPG is offered as a second-best alternative. The idea is to ensure that total pension income (state, occupational and personal) is brought up to a specified minimum. If this were to be £90 (as in most of their calculations) then a person with a basic NI pension of £62.45 per week plus occupational pension of £15.00 per week would receive an additional £12.55 per week. Whilst a 100% of withdrawal would apply, the MPG would not otherwise be subject to a test of current income or assets. The model presented here is described as an ‘interesting intermediate route between an increase in the National Insurance basic pension and the extension of means testing through greater reliance on social assistance. It costs less than an increase in the basic pension and does not involve the intrusive means test of Income Support.’ Highly recommended reading for current policy makers, the discussion paper is available from the Microsimulation Unit, Department of Applied Economics, University of Cambridge, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DE Tel 01223 335264, e-mail hs117@econ.cam.ac.