UK Pensions Policy Social Policy Area Term Paper

Length: 11 pages Sources: 1+ Subject: Economics Type: Term Paper Paper: #19595487 Related Topics: United Kingdom, Bleak House, Welfare Reform, Fiscal Policy
Excerpt from Term Paper :

¶ … UK Pensions Policy" - Social Policy Area

The pension policy of the UK is one that is followed as a model by various other parts of the world for its efficient dealing with the problem of pensions for the aged of the UK. The government takes a ken interest in reforms in the area of pensions, and it was for this reason that it announced the latest set of reforms in the year 2000, in its 'pre-budget report' that was released in the month of November of the same year. The report contained a series of reforms and improvements for pensioners. Some of the measures were: increases in the pensions according to the above- inflation rates, above inflation increases in the rates of the 'minimum income guarantee', also known as the MIG, and the introduction of the newly formulated 'pension credit' that was basically a means tested benefit for the pensioners. Taken as a whole, the government will be paying pensioners the amount of more than 4 billion pounds a year, every year to pensioners, from the year 2003-2004 onwards. This amount would be a great boon for pensioners in improving the quality of their lives in their final years, especially in the case of those who are extremely economically deprived. (Recent Pensions Policy and the Pension credit)

The fact that the UK is a 'unitary' state in which the central government plays a major role in the directing of several affairs at the state level must be remembered where the issue of Pension Policy is concerned. All the different regions have a separate Secretary of State as well as an Administrative Department based in the Central Government, and its own executive and assembly department that will play the role of the central government in the ministry. At times, the Health Board is responsible for social services and the Housing Executive attends to housing problems. However, this is not the permanent framework upon which the entire government system runs; there may be changes from time to time and these changes are implemented for the benefit of the people of the UK. For example, the Department of Social Security has been recently reformed into the Department of Work and Pensions, and this has resulted in the formation and implementation of newer policies for the benefit of pensioners. (An Introduction to Social Policy) The Department for Work and Pensions is now responsible for the Government's entire welfare reform policies and agenda, keeping in mind the basic aim of promoting independence and self-esteem and providing opportunities of improvement to those citizens who are aged and disabled or sometimes employed. (Department for Work and Pensions)

New Labour is the name that has been adopted by the British political Labor Party as an alternative name. It originally came into existence after a conference slogan that had been used by the Party in the year 1994, after which it became popular by demand. With the adoption of this new name the Party saw an amazing rise in its steadily falling fortunes, and therefore the name was considered to be lucky. Though the name is now being used only in party literature, it is still popular and is also the most satirized names in the history of the UK. (New Labour)

The important question is, why was there a need for a pension strategy, and what prompted the New Labour Party to come up with a complete set of reforms and changes in the pension schemes and policies for pensioners? In the year 2002, the entire subject of UK pensions was undergoing a crisis. Not only the government but also the public demonstrated a large amount of concern for he issue of pensions. Stock markets had also nose-dived, leading to a sharp decrease in the returns of investments for investors and savers and pensioners. A lot of companies were also closing down their schemes for 'final salaries' and this led to a widespread panic attack among those persons who were retiring from work at the time. In...


According to rough estimates, there is a gap of about 27 billion pounds between what people actually needed to save in order to retire comfortably and lead a fruitful life after retirement, and the actual amount that was being saved. The situation was recognized as a 'crisis' and the government was forced to look into the matter and deal with the crisis immediately. Therefore, the government outlined its plans for the improvement of the lives of pensioners in its 'Green Paper', wherein a long-term resolution for the ongoing crisis was outlined. (Pensions in Crisis, Your Queries)

It was against this background that the New Labour Party presented its set of reforms for the pensioners and the retired people of the UK. This document outlined a number of reforms for employer-sponsored schemes that would be offered by a company for the persons retiring from its offices, and a thorough change in the contracting arrangement of certain second-tier pension schemes. (Working and Saving for Retirement) This document will help the pensioners of the UK, whose numbers were growing at a faster rate than ever before, as compared to those people who are still able to remain in the workforce. This phenomenon is sometimes even referred to as a 'demographic time bomb', wherein employees can be expected to live well after they have reached fifty years of age, and their productive years as employees stops by the age of 50 to 60 normally. The result will be that most of these people will have to spend more years of their lives outside a place of employ than within it. The gap between the amount being saved and the amount that is actually needed widening as days go by is another issue that is bothering policy makers and this Green Paper brought out by the New Labour party has been able to address these sensitive issues in a proper manner. (Q and A, Pension shake up explained)

One of the reforms written about in the Green Paper brought out by the New Labour's Pension Strategy is that the second state pension must replace SERPS that had been the norm until the year 2002. SERPS is nothing but the 'State Earnings Related Pensions' that was the name given to the governments additional pension scheme. Under this scheme, those persons who had been earning about 75 pounds or less per week and had not been 'contracted out' would in effect have been building up an additional amount of pension under the scheme, which is now known as the 'State Second Pension'. Even those persons, who had made contributions to the scheme before the month of April 2002, are still eligible for the additional pensions and this additional income will continue for many years to come for these people. The reason behind the governments replacement of the SERPS with that of the State Second Pension Scheme was because the government felt that the disabled and the handicapped and those with long-term or even fatal and chronic illnesses a chance to have the benefit from the additional pensions being offered to them under this new scheme.

The government is also able to demonstrate its support for those people who belong to the middle or low-income earning groups through this scheme, whereby these people may still earn less but will benefit more in their future years because they will become eligible for additional pension under the Second State Pension Scheme. The innate working of this scheme is based on the principle that the earnings or the credits of earning groups is hiked up to a flat rate of 10,800 pounds, irrespective of whether these people have actually earned this amount or not. For example, if a person has been able to earn less than 10,800 pounds, but more than the lower earnings limit of the National Insurance of 3,900 pounds, then the government under this scheme will treat that person as having earned the amount of 10,800 pounds. Any individual, who had been earning the required minimum rate and had also been paying sufficient contributions to the National Insurance, would become automatically eligible to be a part of the additional pension scheme. Certain people who are already members of some private pension schemes have the option of opting out of joining this scheme by the system of 'contacting out' of SERPS whereby that person's employer as well as that person would have to pay lesser amounts to the National Insurance than he would otherwise have to pay. If a person belonged to a personal pension plan or a stakeholders plan already, then he could contract out and the government would still pay up part of the contributions towards National Insurance into this plan, in the form of a rebate. (Pensions Explained, what is Serps?)

However, people who had been originally paying into the SERPS scheme would…

Sources Used in Documents:


An Introduction to Social Policy. Social policy in the UK. Retrieved from Accessed on 3 November 2004

Clark, Tom. Pensions Policy and pension Credit. The Institute for Fiscal Studies. Briefing Note: No: 17. Retrieved From

Accessed on 3 November 2004

Contractors Face Bleak Retirement. Contractor, UK. Retrieved From

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"UK Pensions Policy Social Policy Area", 03 November 2004, Accessed.17 June. 2021,

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