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Is there a Pension Crisis in the UK?

E Philip Davis


The UK pension system is traditionally seen as offering a good example
to other countries, having features such as a low social security burden
of the public sector as well as a high coverage of well-financed voluntary
private schemes. But recent developments suggest that the model has
shown weaknesses. The most pressing current issue is underfunding of
defined benefit occupational schemes following the bear market; but there
are also the ongoing crises of mis-selling of personal pensions and the failure
of Equitable Life insurance company. In this paper we seek to investigate
whether there is indeed a crisis and what the locus of the true crisis is. We
find that there are important longer-term weaknesses of the UK system as well
as these current difficulties, focusing on social security as well as private
pensions. Pitfalls faced by UK policymakers offer important lessons to other
countries seeking to set up or expand private pension provision.