Britain's Answer for Future Retirement Income : Possible Lessons for the United States

Both the United Kingdom and the United States face similar budget pressures over their national retirement programs, shortfalls in individual savings, and a rapid decline of traditional private defined benefit pension plans. In both the U.K. and the U.S., major stumbling blocks to reform have been whether the government can afford the changes and how employers might be hurt by a national mandate to contribute to their workers' retirement accounts. Although Congress is not about to overhaul U.S. retirement policy, Britain has very significant changes on the table, with the prospect of action later this year: The government is moving to raise the eligibility age for state pensions, create a new mandatory system of private savings accounts, and require both employer and worker contributions to the accounts. John Hutton, British secretary of state for work and pensions, outlined the British proposal for pension reform at a June 14, 2006, meeting in Washington, DC, organized by the Retirement Security Project. This paper summarizes his presentation and initial reaction by U.S. experts. The PDF for the above title, published in the August 2006 issue of EBRI Notes, also contains the full text of another August 2006 EBRI Notes article abstracted on SSRN: "An American Perspective on the Chinese Pension System."