LA PREVIDENZA PUBBLICA E PRIVATA NEL REGNO UNITO. IL MODELLO INGLESE IN PROSPETTIVA COMPARATA CON IL MODELLO ITALIANO

The United Kingdom was one of the first countries in the world to develop formal private pension arrangements (beginning in the 18th Century) and was also one of the first to begin the process of reducing systematically unfunded state provision in favour of funded private provision (beginning in 1980). This explains why the UK is one of the few countries in Europe that is not facing a serious pensions crisis. The reasons for this are straightforward: state pensions (both in terms of the replacement ratio and as a proportion overage earnings) are amongst the lowest in Europe, the UK has a long-standing funded private pension sector, its population is ageing less rapidly than elsewhere in Europe and its governments have taken measures to prevent a pension crisis developing. These measures have involved making systematic cuts in unfunded state pension provision and increasingly transferring the burden of providing pensions to the funded private sector. The UK is not entitled to be complacent, however, since there remain some serious and unresolved problems with the different types of private sector provision. This thesys examines the key issues relating to the UK pension system. It reviews the current system of pension provision, describes and analyses the reforms since 1980, examines the legal regulatory and accounting framework for occupational pension schemes, assesses the different types of risks and returns from membership of defined benefit and defined contribution pension schemes, and investigates the management and investment performance of pension fund assets. We now turn to a broad assessment of the current state of private pensions in the UK. There are two types of pension fund; occupational (run by a firm for its employees) and personal (based on an individual contract with an insurance company). A flat-rate first-tier pension is provided by the state and is known as the Basic State Pension (BSP). Second-tier or supplementary pensions are provided by the state, employers and private sector financial institutions, the socalled three pillars of support in old age. The main choices are between: a state system that offers a pension that is low relative to average earnings but which is fully indexed to prices after retirement; an occupational system that offers a relatively high level of pension (partially indexed to prices after retirement up to a maximum of 5% p.a.), but, as a result of poor transfer values between schemes on changing jobs, only to workers who spend most of their working lives with the same company; and a personal pension system that offers fully portable (and partially indexed) pensions, but these are based on uncertain investment returns and are subject to very high set-up and administration charges, often inappropriate sales tactics, and very low paid-up values if contributions into the plans lapse prematurely. Employees in the UK in receipt of earnings subject to National Insurance Contributions (NICs) will build up entitlement both to the BSP2 and, on ‘band earnings’ between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL), to the pension provided by the State-Earnings-Related Pension Scheme (SERPS). These pensions are paid by the Department of Social Security (DSS) from State Pension Age which is 65 formen and 60 for women. The self-employed are also entitled to a BSP, but not to a SERPS pension. Employeeswith earnings in excess of the LEL will automatically be members of SERPS, unless they belong to an employer’s occupational pension scheme or to a personal pension scheme that has been contracted-out of SERPS. In such cases both the individual and the employer contracting-out receive a rebate on their NICs and the individual foregoes the right to receive a SERPS pension. However, there isno obligation on employers to operate their own pension scheme, nor, since 1988, is there any contractual requirement for an employee to join the employer’s scheme if it has one. There is a wide range of private sector pension schemes open to individuals. They can join their employer’s occupational pension scheme. This study aolso examines pensions portability and the preservation of pensions rights in the U.K in comparative perspective with Italian pension found model.We review the economic theory underlying pension schemes and the arguments for and against more pensions portability. We show that the effect of current laws and actuarial practice is to penalize young early leavers heavily, so that they can lose up to 30% of the pension that they might have expected when they retire. We analyze a policy to reduce this early leaver penalty according to a sliding scale that involves determining transfer values for younger workers on the basis of actual contributions paid rather than on notional accrued benefits. At the end we compare the position of early leavers in the U.K. and Italy in front of European welfare market.