UK national insurance fund: development of traditional contributory sovereign pension funds and lessons for China

XU Can1,2

(1.National Disaster Risk Reduction Centre of the Ministry of Emergency Management of the People’s Republic of China)
(2.Graduate School of the Chinese Academy of Social Sciences)

【Abstract】Since the 1970s, UK’s pension reform featuring privatization has continued until today, a process in which the nation’s pension responsibility has been continually transferred to the private sector. The proportion of State Pension as the most important pillar has as a result been on the decline. The accumulation of surplus assets from the balance of the national pension plan contributions and expenditures has led to the formation of the National Insurance Fund. As a typical contributory sovereign pension fund, the UK National Insurance Fund has had liquidity and security as its top priority. After achieving rapid growth in the early 21st century, the fund has seen its surplus continue to decline and stabilize at a low level in recent years and is expected to run out soon and require a lot of financial assistance. The declining surplus is attributable to the decrease in its returns from investment. After the reform that links the fund’s return ratio with the national basic interest rate, the fund suffered the fallout of the global financial crisis and as the country’s benchmark interest rates nosedived, the fund’s return on investment failed to cover the inflation rate. By reviewing, analyzing and discussing the basic conditions, investment operation and characteristics of the UK National Insurance Fund, China can draw lessons from the UK as it carries out the reform of the pay-as-you-go basic pension insurance fund investment management.

【Keywords】 UK; National Insurance Fund; contributory sovereign pension fund;

【DOI】

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This Article

ISSN:1007-0974

CN: 11-3799/F

Vol , No. 03, Pages 60-72+5

May 2019

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Article Outline

Abstract

  • 1 Overview of the development of the UK NIF
  • 2 Investment operations of the UK National Insurance Fund: the top priority of liquidity and safety
  • 3 Evaluation and enlightenment
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