Over the next 12-18 months the PPI will produce short Briefing Notes on topical policy issues and will respond to major Government consultations, Select Committees or other Parliamentary inquiries on policy on pensions and retirement provision. Major research will concentrate on 3 broad themes:
Theme 1: Providing an evidence base on current and future trends in retirement income provision in the UK
1.1 Pensions Primer: a guide to the UK pensions system and Pensions Facts
The PPI publishes reference manuals that describe the current pension system in the UK and give key facts and figures on retirement income provision in the UK. Click here for further details.
1.2 Pensions Modelling and Development
The PPI has developed a suite of economic models (funded by the Nuffield Foundation) that enable the PPI to model the implications of alternative pension policies for hypothetical individuals, for the total aggregate costs of the pensions system and of the distributional implications of alternative policies. The models underpin much of the PPI’s research. Click here for further details on the PPI Models.
The DWP commissioned the Pensions Policy Institute (PPI) to validate Ipen against the PPI’s Individual Model (IM). The PPI’s IM is a model developed by the PPI to project incomes in retirement for hypothetical individuals and couples. Please click here for further details.
The PPI has been awarded a two-year grant from the Nuffield Foundation to further develop the PPI's suite of models. The project will develop the PPI's models to ensure that they remain fit-for-purpose and can accommodate recent policy changes in both the private and public sector pensions.
Theme 2: The design and policy implications of the Government’s state and private pension reforms
During 2013 the Government is expected to issue a White Paper on plans for further state pension reform and future State Pension Age changes. The Government is also expected to consider the possibility of introducing Defined Ambition (risk sharing) pensions. The PPI will analyse and respond to any proposals. We will also submit evidence to relevant Select Committees or other Parliamentary Inquiries.
2.1 Pensions Tax Relief in the UK
In recent years there have been significant changes to the system of tax relief for pension saving in the UK, including a lowering of the annual allowance and lifetime allowance. There has been speculation that there may be further changes made to tax relief, and in particular to the tax relief available to higher earners.
The PPI is undertaking a research project to analyse the system of Pension Tax Relief in the UK, and the potential impact of alternative reform proposals. This is a consortium funded project – TUC, Age UK, Partnership and the Actuarial Profession. There are two areas that this research will cover; a detailed description and analysis of the current system of tax relief, and an analysis of 2 possible options for reform of the tax relief system.
This research builds on previous PPI work in this area: The impact of tax policy on employer sponsored pension provision (click here to view) and Tax Incentives for Pension Saving (click here to view)
2.2 The implications of the Government’s reforms to introduce automatic enrolment into private pension saving
2012 saw the introduction of auto-enrolment into workplace pension schemes in the UK. From October 2012 onwards, every employee aged between 22 and SPA and earning more that £8,105 will be auto-enrolled into a workplace pension scheme, where they will remain unless they opt-out.
When contributions are fully phased in, auto-enrolled individuals will have a minimum of 8% of ‘band earnings’ being paid into their pension, with at least 3% from the employer and the Government making a contribution through tax relief.
Over the next two years (2013 and 2014) the PPI plans to publish a series of research reports that investigate the potential impact of auto-enrolment into private pensions on individuals and their levels of pension saving but also on the shape of the private pension market. Not only will these reports serve as an invaluable guide to the potential impact of policy as it will be implemented, but they will also form a baseline against which the future impact of auto-enrolment can be measured.
The proposed PPI research reports will cover a number of different aspects of the potential impact of auto-enrolment into private pension saving:
- What level of pension contribution is needed to obtain an adequate retirement income?
- How can older workers be helped to benefit from automatic enrolment?
- Will automatic enrolment increase pension saving?
A consortium of major sponsors (including DC Investment Forum, the ABI, Prudential and Legal and General) who will sponsor particular research reports and series sponsors (including DWP and B&CE Benefit Schemes) who will contribute to the project as a whole have been put together to fund this research.
The PPI has conducted previous work in this area. See the following PPI Briefing Notes: Briefing Note 42 - Will Personal Accounts increase pension saving? (click here to view) and Briefing Note 44 - Incentives to save in a pension: a review of PPI research (click here to view)
 Originally planned to be by 2017, but now delayed until an as yet unspecified later date
 Although the ‘standard’ case is likely to be a 4% employee contribution, 3% employer contribution and 1% Government contribution, as long as the employer pays at least 3% of band earnings and the total is at least 8% of band earnings, any combination is possible.
Theme 3: The future of existing occupational pension provision
3.1 Public Sector Pension Reform
The PPI has been awarded a research grant from the Nuffield Foundation to provide an assessment of the Coalition Government’s final agreed reforms to the public sector pensions.
In October 2012, the PPI published the first stage of the research that set out the PPI’s independent assessment of the potential impact of the Coalition Government’s proposed reforms to the public service pension schemes on the value of the pension benefit for members of the four largest public service pension schemes. The analysis covers the four largest public service schemes: the NHS, Teachers, Local Government and Civil Service schemes which account for around 85% of public service pension scheme members.
The intention of the report is to inform the policy debate and to aid understanding about the potential impact of the Government’s proposed reforms to the public service schemes. The PPI is not lobbying for or against the implementation of the Government’s proposals.
The PPI will also publish a second stage of this research which will examine the implications of the reforms for the long-term affordability and sustainability of the schemes. We aim to produce and launch a final report in early 2013.
To read the 2012 research undertaken so far please click here.
The PPI provided a similar assessment of the Labour Government’s reforms in 2008, please click here to view. Please click here to see the PPI research into how different reforms would affect individuals, and the potential impact on long-term affordability and sustainability.