Simplification is the key - Centre for Policy Studies

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5. THE TREASURY’S PERSPECTIVE 5.1 An international comparison Figure 10 compares the sources of income of the over-65s across the OECD nations, comprising state and private (including occupational) pensions and benefits, and employment. Long-established cultural and societal differences explain the considerable variety. Figure 10: Sources of incomes of the over-65s in the OECD 104 Percentages of household disposable income, mid-2000s On average, across the OECD, public transfers (pensions and mean-tested benefits) represented 60% of total pensioner income, with the over-65s being most reliant on the 104 OECD, Pensions at a glance 2009, Figure 2.3, 2009. 37
state in Hungary and France (85% of income). Conversely, only 15% of Finns’ income is derived from the state, but participation in occupational plans is mandatory. The UK places a relatively heavy reliance on private pensions and savings (39% of income), partly because it has one of the lowest state pensions in the OECD, evident from looking at the state pension net replacement rate (NRR). The NRR is the ratio of state pension income (including mandatory private pensions) to earnings, “net” meaning taking into account taxes and social security contributions. In 2006 it averaged 70% across the 30 OECD countries. 105 Figure 11 shows the NRR for people on 50% and 150% of average earnings, with the countries ranked in reverse order of the NRR of those on average earnings (i.e. Mexico the lowest). Figure 11: Net pension replacement rates (NRR) by earnings levels Low earners' NRR (50% of mean) High earners' NRR (150% of mean) * Income from mandatory private pension schemes is included (11 countries) Mexico * Japan Ireland United Kingdom New Zealand United States Korea Australia * Canada Germany Finland Belgium Czech Republic Sweden * Switzerland * France Norway * OECD Portugal Slovak Republic * Italy Poland * Spain Austria Denmark * Iceland * Luxembourg Netherlands * Hungary * Greece Turkey 150 125 100 75 50 25 0 Net pension replacement rate as a % of earnings 105 For 2006. OECD, Pensions at a Glance 2009, 2009. 38
Page 1 and 2: Simplification is the key Stimulati
Page 3 and 4: THE AUTHOR Michael Johnson trained
Page 5 and 6: A note concerning data Finding a co
Page 7 and 8: These proposals depend upon having
Page 9 and 10: SUMMARY The UK’s long-term savin
Page 11 and 12: any annuitisation requirement, prov
Page 13 and 14: Thus, had pension savings products
Page 16 and 17: INTRODUCTION There has been a flood
Page 18 and 19: PART ONE: THE LONG-TERM SAVINGS LAN
Page 20 and 21: Japan’s savings ratio was once th
Page 22 and 23: scheme contribution rates are lower
Page 24 and 25: Table 1: Funded pension scheme asse
Page 26 and 27: 1.9 The international perspective A
Page 28 and 29: Table 4: ISA savers’ income distr
Page 30 and 31: Table 6: The complexity of the tax
Page 32 and 33: Figure 4: Income options upon retir
Page 34 and 35: savings by delivering a framework t
Page 36 and 37: Figure 7: When non-savers might sta
Page 38 and 39: There are other aspects to consider
Page 40 and 41: 3. THE EMPLOYERS’ PERSPECTIVE 3.1
Page 42 and 43: When employees with DC funds retire
Page 44 and 45: More specifically, employers are no
Page 46 and 47: Both businesses do have important c
Page 48 and 49: year. 91 Clearly, there are conside
Page 50 and 51: elderly and the wealthy, not least
Page 54 and 55: Whilst the UK’s NRR for the mean
Page 56 and 57: Currently, reducing pensioner pover
Page 58 and 59: Table 13: Net cost of tax relief un
Page 60 and 61: TEE would be hugely attractive to p
Page 62 and 63: 5.6 Tax treatment: international pe
Page 64 and 65: PART II THE PROPOSALS AND THEIR IMP
Page 66 and 67: Proposal 6: post-retirement, amend
Page 68 and 69: 7. TAX SIMPLIFICATION: SOME OPTIONS
Page 70 and 71: 8. THE IMPLICATIONS FOR SAVERS Impl
Page 72 and 73: The higher rate taxpayers’ perspe
Page 74 and 75: segregated from any employer-sponso
Page 76 and 77: epresent a further step down the pa
Page 78 and 79: 10. THE IMPLICATIONS FOR THE PENSIO
Page 80 and 81: Such principles would have to ensur
Page 82 and 83: Figure 13: The cost of pension savi
Page 84 and 85: pool of underlying pension assets (
Page 86 and 87: hardship” facility, whereby cash
Page 88 and 89: occupational pension scheme benefit
Page 90 and 91: CONCLUSION We would save more, for
Page 92 and 93: ACKNOWLEDGEMENTS This paper was cat
Page 94 and 95: APPENDIX I Summary of proposals fro
Page 96 and 97: APPENDIX II Value of assets in priv
Page 98 and 99: depending upon age at the time that
Page 100 and 101: APPENDIX V PRE-RETIREMENT ACCESS TO
Page 102 and 103:
APPENDIX VII FINANCIAL PLANNING TOO
Page 104 and 105:
APPENDIX VIII THE MODEL 173 The
Page 106 and 107:
GLOSSARY Alternatively Secured Pens
Page 108 and 109:
pensions and earnings, but excludes
Page 110 and 111:
those with earnings above £4,940 b
Page 112 and 113:
in cash terms, i.e. fixed at £770
Page 114:
The UK savings industry is barely t
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