The Pensions Policy Institute (PPI), an educational research charity, has set out the rationale, objectives and direction for the framework it is planning to develop for analysing changes in the UK pension system.
The move comes after the organisation in May announced it would be developing such a framework, saying that several frameworks existed to evaluate and compare pension systems internationally, but “the UK pensions landscape is complex and at present, no single model can consistently capture the impact of changes to policy and policy levers over time, and the way in which critical factors interact to determine pension outcomes”.
The underlying framework methodology is due to be published in December, but in a recent briefing paper the PPI shed some insights into its thinking about the framework.
It explained that the framework’s objective is to determine the extent to which the UK pension system supports the overarching goal of income security for individuals in later life by analysing the underlying objectives of adequacy, sustainability and fairness against a series of indicators.
“The UK pension system has seen unprecedented change over the past twenty years and although the impact of some changes are clear and measurable, others are more abstract,” wrote Anna Brain, policy research associate at the PPI.
“To track what these changes could mean for retirees in the future, it will be crucially important to understand how policy outcomes relate to each other over time.”
The indicators PPI is planning to use for its framework will comprise various measures and, where available, targets, according to Brain.
Outcomes will be assessed from the perspective of individuals, employers, the pensions and financial services industries, the state and other public bodies “and crucially, sub-groups within them”.
Not comparative research
According to the PPI’s report, the framework it is developing is different from other leading studies because it is not intended to compare the UK with other countries.
It said there were limitations to comparative research, with Brain writing that “the requirement for indicators and measurements to be consistent across constituent countries can make it difficult for outputs to capture the complex interactions that underlie divergent outcomes”.
According to the PPI’s briefing paper, the framework should address two key questions in respect of how the pension system is supporting income security for individuals in later life: “what happened, and what if?”
“Based on these questions, a number of key challenges have been identified that we expect to face going forwards,” wrote Brain.
“They include identifying where measurements should be examined against targets such as replacement rates in order to inform indicator tests, assessing the relative impact of side-effects and interactions, and presenting normative or subjective concepts such as fairness in an objective way.”
The first full analysis of the UK pension system using the framework is due to be conducted in 2022, with the resulting reported intended to serve as a baseline against which the system could be assessed annually, and against which the potential impacts of policy options could be evaluated.
The UK pensions framework project is being sponsored by Aviva.
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