Exploring the implications of pensions policies

The DWP uses the British Household Panel Survey (the predecessor of Understanding Society) in its dynamic microsimulation model Pensim2. The DWP designed Pensim2 to estimate the incomes of future pensioners; samples are ‘grown’ through time and the life events relevant to each family and individual. Pensim2 therefore allows the DWP to analyse the long-term implications of existing and proposed pension policies.

Longitudinal data is important for modelling transitions. Pensim2 includes data from the BHPS for the elements related to partnership, fertility, labour market status, earnings and savings.

Automatic Enrolment in workplace pensions

Recently, the DWP used Pensim2 in the development of Automatic Enrolment into workplace pensions. The DWP’s Automatic Enrolment evaluation report (2016) states that the policies ‘require employers to automatically enrol eligible workers into a qualifying workplace pension scheme and make a minimum contribution’. Automatic Enrolment has meant that:

• 6.87 million workers have been automatically enrolled into a workplace pension
• Membership of a workplace pension has increased from 10.7 million in 2012 to 15.1 million in 2015

Further information

DWP slide deck: Model Development Division – our models and our data.

DWP report: Automatic Enrolment evaluation report 2016.

DWP report: Framework for the analysis of future pension incomes.

Longitudinal Studies Strategic Review ‘2017 Report to the Economic and Social Research Council: Executive Summary and Policy Impact Case Studies’ outlines the impact of the Pensim2 model on Automatic Enrolment.

The Institute for Fiscal Studies (IFS) report: An assessment of PENSIM2 (WP04/21).

Family and householdsIncome and expenditure