In order to encourage retirement saving in Britain: should we place more emphasis on traditional tax incentives, or on how we ‘frame’

retirement saving opportunities, such as the specification of ‘default options’

in levels of saving?

What is a pension?

•A regular payment made to a person during their years of retirement•Pensions allow an individual to smooth consumption across their life-time, sacrificing consumption in working life for consumption in retirement years

Defined Benefit Defined contribution

Also known as a final salary scheme. The amount of income an employee receives on retirement is defined - or decided - in advance, based on the number of years he or she has worked for an employer and the level of their salary when they retire.

Also known as a money purchase scheme. The level of contributions made by the employer (and, frequently, the employee) are set, but the amount of income received on retirement is not.The contributions are usually set as a percentage of salary.A defined contribution pension scheme is set up by the employer, and he or she must contribute to the scheme.

•The two main types of pension are Defined Benefit (DB) and Defined Contribution (DC)•The Guardian defines the two as follows:

The current issues facing pension provision

• Ageing population

• Low rates of private saving

• The mis-selling of personal pensions in the late 1980s has created low confidence

• More recently, a collapse of a large number of company final salary pension schemes

Data shows that there is a danger that people will face inadequate

pensions without high value assets or a later retirement age

Current Trends in UK pensions

• One article (BBC ) showed that despite fluctuations in private sector pensions, the deficit of £271bn recorded at the end of December illustrated that the cost of pension provision has risen significantly in recent years

• Other evidence suggests that the prospects for public sector pensions are also dismal. Strikes were held in November 2011 over government plans to reform public pensions which included increasing the retirement age and increasing worker contributions

• Consequently, it appears that pension provision is a verycontroversial issue concerning the UK today.

• This presentation aims to discuss these problems in more detail and examine the optimal methods for providing retirement pensions in the UK

Bibliography

• The Guardian. (2007). Defined Benefit Pension. Available: http://www.guardian.co.uk/business/2007/apr/11/businessglossary79.

• Knight, J. (2005). How the pensions crisis evolved. Available: http://news.bbc.co.uk/1/hi/business/4364258.stm.

• BBC News. (2012). Pension deficit drops slightly, says PPF. Available: http://www.bbc.co.uk/news/business-17352095.

• Croucher, S. (2011). November 30th Strike: What is the Public Sector Pensions Row About?. Available: http://www.ibtimes.co.uk/articles/257737/20111129/november-30th-strike-public-sector-pensions-row.htm