Pensions, by Michael Hill

Policy Press, 2007, xiii + 183 pp, pbk, 978 1 86134 851 7, £12.99

This book is the first in a new series designed by the Policy Press to guide the reader through hotly debated topics: and where better to start than with pensions.

Very sensibly a glossary is placed at the beginning. This introduces the reader to essential terms and enables them to make sense of what follows. What follows is clear and well-organised – and particularly clear about the complexities resulting from policy inevitably being shaped by compromises based on previous compromises.

The author’s early chapters contain histories of pensions and of pensions policy in the UK, and these parts of the book will be useful to students of the subject. What emerges is government preference for means-tested and asset-tested pensions (now in the form of Pensions Credit) rather than for uprating the contribution-based basic state pension. It is interesting that Hill defines Pensions Credit as the ‘first tier’, followed by the National Insurance pension and the State Earnings Related Pension Scheme (SERPS) as the ‘second tier’, with a third tier being that of occupational and private provision. A more traditional listing would have put the National Insurance pensions first. Hill’s listing relates well to the Government’s preference for means-testing and also to OECD policy which is expressed using the same three tiers in the same order. (The International Association for the Study of Insurance Economics employs a listing different again: the first pillar is both means-tested and contributory state pensions; the second is occupational pensions; the third is private pensions; and the fourth is income earned after retirement age. *)

Then follow chapters on pension scheme adequacy (a wideranging and thorough discussion, particularly in relation to the often competing aims of income replacement and poverty reduction); alternative pension models (based on the first two tiers previously listed, and leading to a discussion of a selection of different countries’ pension systems); pension age and retirement age (and the complex relationship between them); the alleged ‘demographic time bomb’ (Hill challenges the theory); and facing the future: the funding obsession. (The trend towards funded schemes is being driven by the alleged crisis, whereas Pay As You Go state pensions still have much to offer).

A chapter on pension reform worldwide questions whether current UK policy to improve SERPS and encourage private provision will do enough for carers (who ‘work’ but are not ’employed’ and therefore get little out of a contribution-based system).

A Citizen’s Pension appears in the glossary and then frequently in the book as an option for reform worth studying, and Hill is surprised that the Government’s Pensions Commission didn’t visit the Netherlands to study their Citizen’s Pension (p.97). The fact that it does work in the Netherlands suggests that the Government here should not have been so quick to dismiss the option in their recent White Paper (p.164). Hill argues that today’s means-tested system (which the White Paper does nothing to alter) discourages private provision for old age, and he advocates a Citizen’s Pension on the grounds that it will encourage both saving and older people’s labour market participation.

We can only agree.

* International Association for the Study of Insurance Economics (The Geneva Association), newsletter 40, March 2007.