UK PENSION SYSTEM
The UK pensions system can be considered to possess three tiers:
1. Tier 1 - Provided by the state and consists of a basic level of pension provision to which
everyone either contributes or has access, providing a minimum level of retirement income.
2. Tier 2 - This is also provided by the state and aims to provide further pension income that is
more closely related to employees’ earnings levels. Tier 2 is less redistributive (from rich to
poor) than Tier 1. The self-employed are currently excluded from second tier provision.
3. Tier 3 - Tier 3 is private pension provision, namely all those voluntary pension arrangements that
are not directly funded by the state. Private pension contributions, from the employer and/or
the individual, fund designated pensions for the individual. Tier 3 includes pensions arising from
automatic enrolment, a policy requiring employers to enroll eligible employees into a qualifying
workplace pension scheme.