Means testing plays an important role in the UK state pension system. We use a dynamic programming model to consider the long-term behavioural effects of a recent policy reform that reduced the marginal tax rates on private income of means tested retirement benefits from 100% to 40%. Our...

This study uses a stylised simulation model to consider potential behavioural responses to the reduction in pension taper rates associated with replacing the Minimum Income Guarantee (MIG) with the Pension Credit (PC). A range of long-run responses to the policy change are identified, summarised...

The design of welfare benefits is a tricky business. In this respect, James Meade placed particular emphasis on the importance of avoiding excessive distortions to the price of labour. Nevertheless, Meade noted that means testing is likely to be desirable in view of the “hideously expensive”...

We develop a simulation model of household behaviour in which both the consumption/saving and labour/leisure choices are endogenous. This model is used to explore the effects of the UK and Danish state tax and benefit systems on the labour supply of old and older workers.We find that, in broad...

The design of welfare benefits is a tricky business. In this respect, James Meade placed particular emphasis on the importance of avoiding excessive distortions to the price of labour. Nevertheless, Meade noted that means testing in the delivery of welfare benefits is likely to be desirable in...

We assess the implications of demographic uncertainty for the United Kingdom’s fiscal position. We construct stochastic population projections and then use the framework provided by generational accounts to project government revenues and expenditures. We present stochastic paths for the...

This paper explores the pricing of annuities in a structural overlapping generations model in which the mortality rate of people when old is uncertain. A market clearing price for annuities is established below the fair price. At this price the willingness of old people to pay the young to carry...

We use a rational agent model of savings and labour supply to considering how consumer responses to a worsening of labour market opportunities could be influenced by the extent of private sector indebtedness. Our simulations indicate that responses to a negative labour market shock depend...

This paper explores the effect of aggregate mortality risk on the pricing of annuities. It uses a two-period OLG model; in the first period, ‘young’ people have a zero probability of death, and in the second period ‘old’ people face an initially unknown risk of death. Old people can...

This report is the end of project submission for the Understanding Debt project undertaken by NIESR for the DWP and DTI. The report focuses upon undertaking a rigorous analysis of private sector indebtedness, and unsecured debt in particular. Key objectives include: • to explore the...