Unemployment and Pensions Protection in Europe: the ... · gradual introduction of...
Transcript of Unemployment and Pensions Protection in Europe: the ... · gradual introduction of...
Unemployment and Pensions
Protection in Europe: the Changing
Role of Social Partners
Occupational Welfare in the United Kingdom:
From Skill Retention Tool to Social Protection Only
for Legitimate Social Risks
Marek Naczyk
Brussels, 22 November 2016
with the financial support of the
Large development of OW in “liberal” UK?
• Except for the NHS, not a very generous welfare state
• To be sure, occupational provision well entrenched:
Voluntary private expenditure, 2011 = 5.3% of UK GDP vs.
2.2% OECD average (OECD 2013)
• Yet huge variation in significance of OW across social
risks:
Old-age pensions vs. the rest…
with the financial support of the
OW’s changing institutional designs and functions
• Late 19th century: rise of the friendly societies
• From early 20th century: expansion of OW mainly as a
result of unilateral decisions made by employers
retaining skilled workers and pacifying labour
• Trade unions reactive rather than proactive
• Fiscal welfare = driver of OW from inter-war period, but
direct state regulation of OW (now tool of social
protection) only from 1960s/70s
with the financial support of the
Occupational pensions: heyday, decline and revival
• Come on top of flat-rate “basic state pension”
and, from late 1950s until recently, were
“contracted out” of additional state earnings-
related pension schemes
with the financial support of the
Tier 1
Public PAYG
Mandatory
coverage
Contributory flat-
rate
basic state
pension
Traditional structure of UK pension system
with the financial support of the
Thatcher government: BSP
uprated in line with prices
instead earnings
Pensions Act 2007: BSP
uprated again in line with
earnings
Source: DWP 2015
Tier 1
Public PAYG
Mandatory
coverage
Contributory flat-
rate
basic state
pension
Tier 2
Public PAYG
Mandatory
coverage
Contributory
earnings-related
GRB/SERPS/S2P
Tier 3
Private fully-funded
Voluntary coverage
Occupational
schemes
Traditional structure of UK pension system
with the financial support of the
Typ
ically
Co
ntra
cte
d o
ut
Occupational pensions: heyday and decline
• Come on top of flat-rate “basic state pension” and,
from late 1950s until recently, were “contracted out”
of additional state earnings-related pension
schemes
• OW covered two-thirds of workforce by early 1970s
• Decline of defined-benefit schemes from Thatcher
era: state regulation + introduction of “personal
pensions”
with the financial support of the
Tier 1
Public PAYG
Mandatory
coverage
Contributory flat-
rate
basic state
pension
Tier 2
Public PAYG
Mandatory
coverage
Contributory
earnings-related
GRB/SERPS/S2
P
Tier 3
Private fully-
funded
Voluntary
coverage
Occupational
schemes
Traditional structure of UK pension system
with the financial support of the
Typ
ically
Co
ntra
cte
d o
ut
Tier 4
Private fully-
funded
Voluntary
coverage
Personal
pensions
Opt out
Opt out
Traditional structure of UK pension system
with the financial support of the
The revival of occupational retirement provision
• Between 2012 and 2018 (result of Pensions Act 2008),
gradual introduction of “auto-enrolment” of workers in
workplace pension schemes
• min. contrib. rate of 8% (with 3 percentage points paid
by employer)
• Mechanism of “contracting out” suppressed
• More generous basic (“new”) state pension
with the financial support of the
Tier 1
Public PAYG
Mandatory
coverage
Contributory flat-
rate
basic state
pension
Tier 2
Public PAYG
Mandatory
coverage
Contributory
earnings-related
GRB/SERPS/S2
P
Tier 3
Private fully-
funded
Voluntary
coverage
Occupational
schemes
Traditional structure of UK pension system
with the financial support of the
Typ
ically
Co
ntra
cte
d o
ut
Tier 4
Private fully-
funded
Voluntary
coverage
Personal
pensions
Opt out
Opt out
Tier 1
Public PAYG
Mandatory
coverage
Contributory flat-
rate
new state
pension
Tier 2
Private fully-funded
Automatic
enrolment with
possibility to opt out
Workplace
(occupational,
group personal,
group stakeholder)
pension schemes
Tier 3
Private fully-funded
Voluntary coverage
Personal pensions
and other
instruments of
individual savings
New structure of UK pension system
with the financial support of the
£155.65 per week
instead of £115.95
per week with old
basic state pension
Min. contrib. rate of
8% of gross salary
with the financial support of the
Role of trade unions in governance
• Traditionally, trustees in defined-benefit schemes were
appointed by employers
• Mandatory to have one third of “member-nominated
trustees” after Pensions Act 1995 (cf. Maxwell scandal)
• Rise of defined-contribution schemes means fewer
schemes are trust-based low union representation
• But, to help auto-enrolment, creation of “low-cost”
National Employment Savings Trust (NEST)
with the financial support of the
Occupational Unemployment-Related Provision?
• Investigated two forms: enhanced redundancy pay and short-time
working arrangements
• While quite prevalent during inter-war and post-war period,
stagnant since the 1970s
• No reliable data on coverage and level of benefits
• Fiscal support:
– No state support for short-time working except for ProAct (2009-2010)
scheme in Wales
– GBP 30,000 ceiling on tax exemptions on (statutory and enhanced)
redundancy pay not revised since 1988
with the financial support of the
Conclusion
• No good occupational provision without good state provision:
– Pensions: parallel decline of state and occupational provision before
reversal in the late 2000s
– Unemployment: retrenchment of state unemployment benefits has not
led to development of occupational provision
• Different challenges in two areas:
– Unemployment: improving legitimacy of state and occupational
provision
– Pensions: ensuring high-quality occupational provision for all social
groups
with the financial support of the