Tax reform and retirement saving incentives: evidence from the introduction of stakeholder pensions in the UK

Faced with ageing populations, OECD governments are seeking policies to increase individual retirement saving. In April 2001, the UK government introduced Stakeholder Pensions - a low cost retirement saving vehicle. The reform also changed the structure of tax-relieved contribution ceilings, increasing their generosity for lower earning individuals. We examine the impact of these changes on private pension coverage and on contributions to personal pension accounts using individual level micro data.

The importance of incentives in influencing private retirement saving: known knowns and known unknowns

We summarise what economic theory predicts about how retirement savings decisions are affected by marginal withdrawal rates created by the tax, tax credit and benefit system, and by the information individuals are provided with. All these predictions vary across individuals with their circumstances. In documenting the incentives to save in a private pension provided by the tax, tax credit and benefit system we show that some individuals face a very strong incentive to place funds in a private pension at particular times during their working lives. Those who are basic rate taxpayers who expect to become higher rate taxpayers or move onto the taper of the Working Tax Credit have an incentive to delay making any private pension contributions until that time, while those expecting to move off that taper have an incentive to bring forward future pension contributions. When examining retirement saving it is important to consider both saving decisions and also the choice of retirement age. We cite previous evidence that both of these margins have been adjusted by individuals in the light of changed financial incentives. In particular there is evidence that spending by working age individuals was increased in the light of the introduction of the State Earnings-Related Pension Scheme. In addition evidence from West Germany and the United States shows that individuals' retirement ages can be affected substantially by changing financial incentives. There is less evidence of reduced spending by working age individuals in the light of the decision to index the Basic State Pension in line with prices rather than the greater of prices or earnings. New evidence from the English Longitudinal Study of Ageing shows that it is low and high wealth individuals who are most likely to be out of the labour market prior to the State Pension Age, though often for very different stated reasons. This suggests that if retirement incomes of those with low wealth are to be increased then increased labour market participation is perhaps a margin for them to adjust. Incentives to work and save are potentially affected by two recent UK reforms: the introduction of the two new tax credits (Working Tax Credit and Child Tax Credit) and the introduction of the Pension Credit. We present some preliminary evidence on whether the strong incentive to contribute to a private pension provided by the two new tax credits has boosted private pension participation, the results of which are somewhat inconclusive and are worthy of further research. Examining the distribution of current pensioner incomes with respect to the incentives induced by the Pension Credit reform we find that many single pensioners will see an unambiguous increase in the incentive to increase their private retirement income - for example through increased saving or later retirement. There are still large numbers of single pensioners who see a reduction in the incentive to increase their retirement income, the majority of whom have private income which they might decide to reduce. Fewer individuals in pensioner couples are eligible for the Pension Credit. Despite this we find that a similar proportion faces a reduced incentive to acquire greater income as we did for single pensioners. If the expectations of individuals do not reflect the current rules of the system, then we cannot expect to observe responses fully in line with economic theory that is predicated on full information. Recent evidence from the English Longitudinal Study of Ageing suggests that on average individuals underestimate their longevity and overestimate the private pension income that they can expect to receive. On the other hand, expectations of being in paid employment at older ages are, on average, similar to the current proportions of older individuals who are in paid work and individuals' expectations of remaining in the labour market at older ages appear to square up with the marginal financial incentives to remain in work that are created by different types of pension scheme.

Pension Provision and Retirement Saving: Lessons from the United Kingdom

We describe the trajectory of pension reform in the United Kingdom, which has focussed on keeping the cost of public pension programmes down during a period of steady population ageing whilst attempting to maintain an adequate minimum level of income security for low income households in retirement. Instruments for achieving these aims have been to target public benefits on low income households, permitting individuals to opt out of the second tier of the public programme into private retirement accounts, and the use of tax incentives to encourage additional private retirement saving. Frequent reforms to the pension programme raise the question of whether households can make reasonable private retirement saving provision in the light of growing complexity and potential shortcomings in individual decision-making. This paper sheds some light on these issues.

Suena bien, pero no potencia adecuadamente el concepto ni el sentimiento.

Advertisers and Agencies prefer commercial music in Spanish spots. There are only a few original soundtracks, and they all seem to sound the same. An investigation of coincidences and creative solutions to connect with targets

Ill health and retirement in Britain: a panel data based analysis

We examine the role of ill-health in retirement decisions in Britain, using the first eight waves of the British Household Panel Survey (1991-98). As self-reported health status is likely to be endogenous to the retirement decision, we instrument self-reported health by a constructed Ѩealth stock' measure using a set of health indicator variables and personal characteristics, as suggested by Bound et al (1999). Using both linear and non-linear fixed effects estimators, we show that adverse individual health shocks are an important predictor of individual retirement behaviour. We compare the impact of our constructed health measure on economic activity with that arising from the use of other health variables in the data set. We also examine the impact of the 1995 reform of disability benefits on the retirement decision.

Pension Provision and Retirement Saving: Lessons from the United Kingdom

We describe the trajectory of pension reform in the United Kingdom, which has focussed on keeping the cost of public pension programmes down during a period of steady population ageing whilst attempting to maintain an adequate minimum level of income security for low income households in retirement. Instruments for achieving these aims have been to target public benefits on low income households, permitting individuals to opt out of the second tier of the public programme into private retirement accounts, and the use of tax incentives to encourage additional private retirement saving. Frequent reforms to the pension programme raise the question of whether households can make reasonable private retirement saving provision in the light of growing complexity and potential shortcomings in individual decision-making. This paper sheds some light on these issues.pensions, social security, retirement saving

Activity in the pallial nerve of knobbed (Busycon carica) and channeled (Busycotypus canaliculatum) whelks recorded during exposure of the osphradium to odorant solutions

Adult horseshoe crabs (Limulus polyphemus) are the preferred bait in the U.S. east coast whelk pot fishery, but their harvest is being restricted because of severe population declines in the Chesapeake and Delaware bays. To identify other baits, the activity in the pallial nerve of whelks was determined during exposure of the osphradium to odorant solutions prepared from horseshoe crab eggs, horseshoe crab hemolymph, and hard clam (Mercenaria mercenaria) tissue. All three elicited significant responses; bait based on them may provide an alternative to the use of adult horseshoe crabs, although extensive behavioral testing remains to be done. Channeled whelk did not respond to molecular weight fractions (>3 kDa and <3 kDa) prepared from horseshoe crab egg odorant solutions but did respond when the molecular weight fractions were recombined. Whelks appear to have broadly tuned chemoreceptors and manufactured baits may need to mimic the complex mixture of odorants derived from natural sources

Sediment and associated radionuclide dynamics within the Ribble Estuary, North West England.

Intertidal environments represent a spatially complex and dynamic system, rendering point sampling geographically and temporally isolated within the context of the entire estuarine system. Airborne remote sensing has the potential to place these spatially isolated sampling points into a quantitative spatial context. Furthermore it provides a valuable data source for quantifying processes within estuarine zones and can supply calibration and validation information for hydrodynamic models. This study focuses on the Ribble Estuary, Lancashire, England which is accumulating elevated radionuclide concentrations derived from authorized industrial discharges from BNFL Sellafield and Westinghouse Springfields. An image mixture modeling approach was used on Airborne Thematic Mapper (ATM) data to derive accurate estimates of intertidal clay, in comparison to concurrent field sampling (r2=0.828) and radionuclide concentrations (r2= 0.822). Data processed for 2003 was compared with similar data from May 1997 (Rainey 1999; Rainey et aL., 2000; 2003) to investigate spatial changes in intertidal clay and 137Cs contamination. These results compared with field sampling data demonstrates considerable reduction (c.52%) in the activity concentrations, which is primarily attributed to processes of sediment dilution. Calibrated Compact Airborne Spectrographic Imager (CASI) imagery combined with concomitant ground reference data, was used to characterize the suspended sediment concentrations and the total suspended load over each flight line. Two sets of time series image data were compared to assess the spatial and temporal changes in suspended sediment and associated radionuclide transportation within the estuarine environment. In conjunction with total volumetric estimates generated from a two-dimensional vertically resolving hydrodynamic model, this data then allowed estimation of the total flux of suspended sediment and radionuclide over the flood and ebb tidal cycle to a reasonable precision (40%). To establish whether these flux estimates are realistic, the results are compared with time series field based observations collected from monthly observations over a two year cycle. The results provide a unique quantitative insight into the understanding of contaminant and sediment transport within this estuarine environment and the environmental processes controlling them. The contribution of field data with the intertidal and flood-ebb tide imagery has provided an enhanced understanding of the interactions of tides and fluvial flow on the spatial distribution of sediments within the Ribble Estuary. It could also be possible to apply the calibrated clay intertidal maps to other heavy metal pollutants that have a high affinity with fine-grained clay particles i.e. Pb, Zn, Cu, Al in estuarine sediments

Public policy and retirement saving incentives in the UK

With ageing populations, OECD governments are searching for policies to increase retirement incomes. The UK government has introduced a series of policies, including the introduction of Personal Pensions from April 1988, of Stakeholder Pensions from April 2001, and the planned introduction of a National Pensions Saving Scheme (NPSS), designed to encourage individuals to save in retirement accounts rather than relying on state provision of social security in old age. These changes have been accompanied by changes in the tax treatment of private pensions. Arguably, the frequency and complexity of these reforms heightens the difficulties that households face in implementing consistent lifetime saving strategies. We examine some of these reform episodes in order to discover how households responded given the micro-incentives implied by this sequence of reforms – in particular those arising from the introduction of Personal and Stakeholder Pensions.Retirement saving pensions.