Portability and Preservation of Pension Rights in the United Kingdom
121 Pages Posted: 18 Jun 2020
Date Written: June 1, 1997
This study examines pensions portability and the preservation of pensions rights in the U.K. 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 propose 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, but with accrued benefits having a more significant weight in calculating the transfer values of older early leavers. The effects of the various actuarial valuation methods and assumptions used as well as the discretion allowed to actuaries are discussed in detail. We also compare the position of early leavers in the U.S., Canada, the Netherlands, and Japan.
JEL Classification: G22
Suggested Citation: Suggested Citation