The Pensions Green Paper: A Generational Accounting Perspective

In this note we show how the policy proposals contained in the government's Green Paper on pensions (DSS, 1998) affect the long term sustainability of the UK's public finances and redistribution between current and future generations. Using the methodology of generational accounting we show that the proposals in the Green Paper will marginally increase the tax rise needed to ensure intertemporal solvency, and slightly worsen generational imbalances. The effect of implied changes in National Insurance Contributions, and the fiscal and generational implications of fully funding the proposed State Second Pension, are also discussed.