British Academy: The UK's National Academy for the Humanities and Social Sciences
Why has it all gone wrong? The past, present and future of British pensions
Abstract
Paying for our futures: the political economy of British pensions
Professor Paul Johnson (London School of Economics)
The British pension system at the start of the 21st century is the result of more than 50 years of bargaining and compromise between the dual pressures of political expediency and economic feasibility. The fiscal implications of generous pay-as-you-go pensions, and their sensitivity to demographic change, have been well understood from Beveridge to Brown, as have the financial and psychological limits to voluntary pension saving. But politicians have repeatedly chosen to ignore or downplay the long-term economic inevitability of higher taxes, higher savings, or longer working lives, and have instead offered the electorate a series of short-term 'fixes' which have responded to immediate pension problems. This has resulted in a pension system in 2005 that is almost universally recognised to be barely adequate for the present, and unsustainable in the future.