Pensions 'privatisation' in Britain: two decades reviewed

Abstract

1 Introduction It appears that the United Kingdom has been quite successful with a political agenda that many countries have adopted later on: the privatisation of pension provision. At the beginning of the 1980s both state and non-state actors had their roles as providers of old age pensions, the state’s role being rather weak by European standards. Still, the Thatcher government set out to widen the scope of occupational and individual private pension provision further while containing the future costs of state pensions. When the New Labour government took office, it abolished the previous State Earnings- Related Pension Scheme (SERPS) for a new State Second Pension that offers better value for employees on low earnings. The state scheme will become less generous for its remaining members, who are expected to contract out, taking advantage of the new stakeholder pensions. If one takes a closer look however, it becomes apparent that things are not quite that simple. State and private pensions in Britain interact in many ways. To find the appropriate regulatory framework for private pensions and to achieve a sustainable public/private mix in pension provision remains high on the political agenda (Bonoli and Palier 2000: 173). These aims trigger further state intervention. There never really was a clear-cut boundary between the public and the private spheres during the past 20 years of British pension policy. But the distinction of the two is even more blurred today. Drawing on recent theoretical approaches highlighting changes in the social production of welfare (especially the growth of “welfare markets” and the rise of the “regulatory welfare state”), I will compare the public/private mix of the UK pension system of the early 1980s with the present setting and analyse to what extent these measures may be characterised as “privatisation” in this context. I will argue that whilst the term is quite appropriate regarding some aspects of the process (e.g. lower state benefits, new private actors, more choice for individuals) it seems less so for others: “Private” pensions are subsidised and heavily regulated by the state. Insufficient “private” provision and means tested state benefits are linked in multiple ways. Empirically my analysis draws partly on 31 expert interviews I conducted with decision makers, experts and influential actors in the field of old-age security in the UK in 2004/5.2 In the first part of this paper I will sketch out the UK pension landscape of the early 1980s (2). Then I will illustrate the changes that led to the current arrangement (3) which is outlined afterwards (4). This provides the background for the assessment of whether the term “privatization” aptly describes these changes (5). I will finally delineate the problems inherent in the British pension policy approach (6) before I close with some concluding remarks.