The Impact of National Insurance Act, 1959, on Private Pension Schemes

Abstract

Can the National Pension Scheme as a whole now be expected to maintain solvency? On what lines may the Scheme be expected to develop in the future? Should contracting out not have been permitted?The temptation to go into these and other fascinating questions will be resisted as far as possible; it is proposed instead to confine the subject matter of this paper reasonably closely within the area implied in the title. In order to establish the context in which the present situation has arisen, it is appropriate, however, to begin with a very brief survey of the more recent history of national and private pensions in Britain before the passing of the National Insurance Act 1959, which will be referred to henceforward simply as ‘the Act’; the situation before the Act comes into operation will similarly be referred to as ‘pre-Act’. When the Act comes into operation two new situations will arise; ‘Contracted-in’ and ‘Contracted-out’. There are thus three conditions to consider, and as far as possible when using expressions in connexion with contracting out such as saving, extra cost, etc., it will be stated whether these are by comparison with the contracted-in or pre-Act position, lack of clarity on this point having been a source of confusion in some of the literature on the subject.