The implications of the `New Insurance Contract' for UK pension provision: rights, responsibilities and risks

The Government, in its 1998 pensions Green Paper, has set out to establish a ‘New Insurance Contract’. It has promised security in retirement for those who cannot afford to provide for themselves, and a strengthened private pensions framework for those who can. In return, it expects individuals, wherever possible, to provide for their own retirement. This paper argues that the security promised amounts to little more than greater means-testing and complexity and that the Government’s ‘strengthening’ of private pensions is actually resulting in greater risk being transferred to individual savers. The Government recognises some of the problems this approach creates, but its attempts to remedy them are not very credible. Nevertheless, the Government will continue on its path because of its determination to reduce the state’s role in pension provision. This paper suggests that the New Insurance Contract is one that individual savers do not fully understand, and may ultimately reject.