“thatcher’s_children”,

8/2/2019 Thatchers_children,

1/19

ersonnel Reviewmerald Article: "Thatcher's children", pensions and retirement - Some

urvey evidence

olin Duncan, Wendy Loretto, Phil White

rticle information:

cite this document: Colin Duncan, Wendy Loretto, Phil White, (2001),""Thatcher's children", pensions and retirement - Some

rvey evidence", Personnel Review, Vol. 30 Iss: 4 pp. 386 - 403

rmanent link to this document:

p://dx.doi.org/10.1108/00483480110393240

ownloaded on: 05-04-2012

eferences: This document contains references to 36 other documents

tations: This document has been cited by 3 other documents

copy this document: [email protected]

his document has been downloaded 1257 times.

ccess to this document was granted through an Emerald subscription provided by SUNWAY EDUCATION GROUP

or Authors:

you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service.

formation about how to choose which publication to write for and submission guidelines are available for all. Additional help

r authors is available for Emerald subscribers. Please visit www.emeraldinsight.com/authors for more information.

bout Emerald www.emeraldinsight.com

ith over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in

siness society public policy and education In total Emerald publishes over 275 journals and more than 130 book series as


2/19

PersonnelReview30,4

386

Personnel Review,

Vol. 30 No. 4, 2001, pp. 386-403.

# MCB University Press, 0048-3486

Received May 1999Revised December 1999Accepted March 2000

``Thatcher's children'',pensions and retirement

Some survey evidenceWendy Loretto, Phil White and Colin DuncanUniversity of Edinburgh, Edinburgh, United Kingdom

Keywords Pensions, Retirement, Young people, United Kingdom

Abstract Despite major changes in the UK pensions scene, including policy initiatives bysuccessive governments, very little is known about people's attitudes towards many pensionsrelated issues. Reports the results of a survey of undergraduates, born on the threshold of theThatcher era, who are themselves about to embark upon influential careers. The findings relateboth to knowledge of pension and retirement details, and the students' own pension and career

plans. In the spirit of the 1980s, the students, especially the males, attached some importance to``individual choice'' in pension arrangements. The need for a role for the State was acknowledged,whilst occupational pensions were not rated highly in employment choice terms. The overall

pattern of responses allows for some tentative evaluation of recent Labour Government proposalsand speculation of future developments in the field of provision for retirement.

IntroductionThere has probably never been a time in British socio-economic history whenmore scrutiny was given to retirement from employment, and the provision ofretirement income, than in the past 20 years. As testament to this scrutiny, oneneed merely cite official and semi-official publications of the 1990s: Department of

Social Security (DSS) (1991; 1993; 1996; 1998); Equal Opportunities Commission(EOC) (1996); Office of Fair Trading (OFT) (1997a; 1997b); and Pension ProvisionGroup (PPG) (1998).

Among a plethora of retirement foci in the UK, three have been particularlyprominent. First, various calculations have projected a prospective decline inthe population at working age after 2010. This will have the effect of reducingthe number of workers for every pensioner from 3.4:1 now to 2:1 in 2040(Daykin and Lewis, 1999). The question of the financial support by, and for, theelderly will become increasingly critical.

The second focus is that of an increasing number of employees,predominantly, but not exclusively, men, who have become economically

inactive some years prior to the State pension age (Rein and Jacobs, 1993). Amultiplicity of factors has contributed to this phenomenon. At one extreme, therehas been a positive option for relief from employment, greatly facilitated byoccupational pension benefits (Campbell, 1999). At the other extreme, employees

The research register for this journal is available at

http://www.mcbup.com/research_registers

The current issue and full text archive of this journal is available at

http://www.emerald-library.com/ft

The authors would like to thank the Department of Business Studies for its assistance with thisproject. Especial thanks are due to Dr Jake Ansell, Katharine Angus, Terry White, and of courseto the undergraduates who participated in the survey. The authors also gratefully acknowledgethe helpful and constructive comments made by the anonymous referees on an earlier draft ofthis article.


3/19

``Thatcherchildren

38

(especially unskilled men) have been dismissed on grounds of age: employershave literally found no further use for them (Campbell, 1999). Whatever thereason along that continuum, ` early retirement'' has become a widespreadexpectation even a ` right'' among a large segment of the working population.

Third, although of significance in their own right, rates of economicinactivity are but a facet of a wider revolution in working patterns, includingthe growth of self-employment, part-time work, and fixed-term contracts. Thegreater the discontinuities which affect people's working lives, whether byaccident or design, the more problematic it may be for people to providefinancially for their retirement.

Against that background, this article is focused upon the attitudes andperceptions of 460 undergraduates, who, arguably should have someawareness of the various pension-related debates and controversies. The viewsof a group of young people about to embark upon their careers is also ofsignificance to employers and policy-makers as today's undergraduates willinherit the consequences of the current debates, and may be instrumental inshaping their outcomes. However, before the findings are reported and thendiscussed, the changing British pensions scene must first be sketched.

The British pensions sceneState pensionsSince the State Old Age Pension was first introduced in 1908, there have beenmany changes in relative gender entitlement, as well as statutory supplementsto the basic State pension, including provisions under the National InsuranceAct 1959, and the addition of the State Earnings Related Pension Scheme

(SERPS) in 1978 (DSS, 1991, p. 9). However, there have been two developmentswhich are especially germane to this article. First, under the Social Security Act1980, future annual increases in the pension were to be linked to the ConsumerPrice Index, rather than to that for earnings, as had hitherto been the case. Thischange has led to a slower annual increase in pension values. For example, in1996 UK consumer prices stood at 222.8 (1980 = 100), compared to averageearnings at 291.4 (Kessler and Bayliss, 1998, pp. 46-7).

A further major change to State pensions was made in 1995. Under thePensions Act of that year, it was decided that women's State pension agesshould be aligned upwards with the men's age of 65, by 2020. Among the

justifications advanced for the 1980 and 1995 decisions included public

expenditure considerations, and growing equality of treatment between menand women in various pension arrangements (DSS, 1991, p. 56).

Occupational pension schemesPensions provided by employers have existed in Britain since the nineteenthcentury (Hannah, 1986). During the twentieth century, however, occupationalpension schemes have become more widespread, and increasingly sophisticated intheir administration, financing and investments. One recent estimate has placedthe value of UK pension funds at 650 billion (Incomes Data Services, 1997).


4/19

PersonnelReview30,4

388

From the late 1960s until the early 1990s, the proportion of employees whowere members of an occupational scheme varied between 48 percent and 53percent (PPG, 1998, p. 53), but such apparent widespread coverage masks certainproblematic issues. One concerned the lack of ` portability'' of pension rights

between jobs (Terry, 1988). Prior to 1975, those employees who left employmentand therefore a pension scheme had no rights under the law to transfer theirentitlements to another scheme, though transfer policies did operate betweenpublic sector employers. Then, in successive legislative steps (Social SecurityActs of 1973, 1985, 1986, and 1990, and the Pensions Act 1995) attempts weremade to improve transfer rights, as well as to facilitate job changes insofar asthese were felt to be inhibited by transfer rigidities (OFT, 1997b).

Other problematic aspects of occupational pensions have centred aroundfacets of access. First, as can be inferred from the overall membership coveragefigures, some 50 percent of British employees have not been scheme members.Women especially suffered from exclusion because of their employmentsituations. For example, their more spasmodic working patterns haveaggravated the portability difficulty (DSS, 1996), and it was found by the EOC(1996) that those in part-time employment (predominantly women) were morelikely to be with an employer who had no pension scheme. Second, until themid-1980s, employers could require that employees belonged to a scheme as acondition of employment. Conversely, employers were under no obligation toadmit employees to membership.

Mindful of rigidities such as these, the Conservative Governments of the1980s and 1990s intervened by means of the law. To take but two examples,attempts were made to improve women's access in the Occupational Pension

Schemes (Equal Access to Membership) Amendment Regulations 1995; and theSocial Security Act 1986 prohibited employers from requiring schememembership as a condition of employment. This latter measure was especiallynoteworthy because one of its objectives, driven by demographic changes, wasto free up people's choices over pensions, and to encourage alternative, non-State pensions: that is, personal pensions.

Personal pensionsOne key to the recent developments to personal pensions (encompassingappropriate personal pensions, ordinary personal pensions, and group pensions(PPG, 1998)) lies in their encouragement by Conservative Governments. In

addition to the signals embodied in the 1986 statute, various tax inducementswere offered, including tax credits over several years for those who switched outof SERPS into a personal plan. Pension providers seized upon these businessopportunities with marketing campaigns from the mid-1980s on.

The various factors alluded to have clearly been successful in encouragingpersonal pension contracts. According to one measure, well over five millionpeople have a personal pension arrangement (PPG, 1998), while the OFT(1997a) estimated that such contracts covered 24 percent of all employees in1991. As a corollary, it is probable that the extension of personal arrangements


5/19

``Thatcherchildren

38

has contributed to a decline in occupational coverage: an estimate for 1995 putthe figure at 46 percent of employees, perhaps the lowest for 40 years (PPG,1998).

What has become clear is that many thousands of employees were attracted

by the campaigns to transfer from occupational schemes to personal oneswhich have proved to be far inferior. Such mis-selling of personal pensions hasreceived critical attention from the regulatory authorities. Pension providershave been required to make good prospective pension deficiencies, and well-publicised fines have been levied (The Guardian, 30 June 1998).

Attitudes towards pensionsAlongside the apparent acceleration of changes in, and attention to, pensionprovision, it is somewhat surprising to observe that our grasp of people'sattitudes towards, and knowledge of, certain pensions issues is tenuous. We dohave some insights into pensions as a whole. In one such instance, the GoodeCommittee discovered by survey that ` people are not well informed, even aboutfairly basic aspects of pension provision'' (DSS, 1993, Research Report One, 25).Other survey evidence has thrown light on the State system: the OFT (1997,p. 10) found a good degree of ignorance among people in general about the levelof weekly basic State pension.

We know next-to-nothing about citizens' approaches towards personalpensions, in large part because this type of pension did not become widelyavailable until the boost of tax concessions in the late 1980s. By contrast, wehave a good deal more attitudinal information about occupational pensionschemes, but it is partial rather than comprehensive. For example, we have

some insights into employers' objectives for establishing and maintaining theirschemes (Casey, 1993; Taylor and Earnshaw, 1995; Terry and White, 1997).Prominent among the perceived functions has been the recruitment andretention of employees. These perspectives help to explain why employerschoose to contribute anything up to 25 percent of an employee's salary into apension fund, although the more typical amount tends to be 10 percent.

On the other hand, we have fewer data on employees' views. One exceptionis again the Goode Committee evidence. A major advantage in the minds ofrespondents was that employers contribute to (and hence could be said to``subsidise'') occupational pension funds; a major perceived disadvantage wasthat pension entitlement might be lost in changing jobs (DSS, 1993, pp. 43-9).

Taking the topic of pensions as a whole, there is a positive dearth of surveydata among younger people. A major study undertaken in 1997 did focus uponyounger (i.e. 11-25 year-old) people's views on a wide range of issues, includingthe world of work, but no questions were broached about retirement andpensions matters (Industrial Society, 1997).

It could powerfully be urged that younger people's views on pensions mattersare likely to verge on the irrelevant: pensions are so distantly-oriented that suchviews would be jejune in the extreme. On the contrary, younger people's viewsare highly significant, for various reasons. First, there is an a priori case to


6/19

PersonnelReview30,4

390

suggest that the earlier people prepare for retirement income, the greater will thatfinancial provision be: insights into young people's planning, albeit at an earlystage in their careers, are of value to policy-makers. Second, the views of peopleborn in the mid-1970s will throw some light upon the impact of a major

phenomenon of recent years, namely the Conservative and Thatcheritehegemony from 1979 to the 1990s. Third, the eliciting of views of as in thispresent study Business Studies undergraduates could be said to be revealing.

Such students, notwithstanding their ages, can be assumed to be moreinformed about pensions issues than other young people (certainly than otherstudents) of the same age, rendering their responses to be of relevance. Thesestudents are also on the threshold of careers where pension choices (e.g. personalvis-a -vis occupational) might be salient. In addition they are likely to gravitate tocareers where pensions are an integral part of the motivational and rewardcurrency. Business Studies students could further be deemed to be an importantsurvey group when regarded as key policy-framers of the future, whether aspotential public servants, or well-informed and demanding voters and taxpayers,or senior finance or HRM managers. Lyon and Pollard (1997, p. 249) similarly

justified their choice of MBA students as the ` next generation'' of managers in asurvey to measure discriminatory attitudes towards older employees.

Survey resultsFieldwork procedure and sample detailsTo redress the gap in information about younger people's knowledge of, andattitudes towards, pensions and retirement issues, 460 undergraduatesstudying Business Studies at the University of Edinburgh participated in a

questionnaire survey in Spring 1997. Questionnaires were distributed inlectures across each of the four years of the degree. Participation wasvoluntary, but as far as could be determined, everyone present at the lecturesagreed to complete a questionnaire. The resulting sample of 460 studentsconstituted nearly 77 percent of those registered for the degree. Therespondents ranged in age from 17 to 29 years, with the majority aged either 19or 20. The pattern of ages across the university years was as expected, i.e. moreolder students in the later years. The gender composition of the sample (55percent male and 45 percent female), although slightly under-representative offemales and over-representative of males registered for the Business Studiesdegree course, was consistent across all four years.

Further information about each respondent, relating to their socio-economicstatus, was obtained from details about education prior to attending university.The 38 students who had completed their secondary education outside the UKwere excluded from this measure (and thus from subsequent analysis on schooltype). Amongst the UK students, the sample was split almost evenly betweenthose who had been educated in the State (n = 205) and independent (n = 198)sectors. Although details of parents' occupational status were also collected,educational background was preferred as a measure of socio-economic status fortwo reasons: firstly there was a larger number of non-responses to the question


7/19

``Thatcherchildren

39

on parental employment, and secondly the answers provided indicated stronghomogeneity of occupational status, with, for example, 81 percent (n = 344) ofstudents stating that their fathers were employed (or had been most recentlyemployed) in the first two Standard Occupational Classification Groups (i.e. in

managerial, administrative or professional occupations). Furthermore,educational sector has previously been successfully used as a proxy measure ofsocio-economic status of young people (Loretto, 1994; 1997).

The effects of gender and educational background of the respondent on all theissues of interest were investigated, and, where appropriate, inter-relationshipsbetween the discriminator variables were also taken into account. Two pointsshould be noted at this stage. The first is that distributing the survey instrumentvia lectures, although a convenient mode of administration, resulted in(unintentional) self-selection into the sample as non-attendees did not complete aquestionnaire. However, as spontaneity of responses and lack of collusion weredeemed to be of paramount importance, it was decided not to revisit subsequentlectures. Second, it is acknowledged from the outset that these respondentscannot be said to be representative of undergraduate students in general.However, their selection can be justified on the grounds that they constitute agroup who are likely to become the senior managers and policy-makers of thefuture. This assertion is supported by the students' responses when asked toprovide details of their desired career out of those who had definite career plans,79 percent wished to be employed in Occupational Groups 1 or 2.

Knowledge of pension agesThe students were asked what they thought the current State pension age was

for men and for women. The majority of respondents answered correctly, with79 percent (n = 362) reporting that the State pension age for men is currently 65,and 66 percent (n = 304) providing the correct answer of 60 for women. Ninetyindividuals (nearly one fifth of the group) thought that women too retire at age65. Not surprisingly, it was shown that those students who had not beenpreviously educated in the UK were substantially less likely to provide correctanswers to these questions. It could be argued that there is no particular reasonwhy these individuals should know about UK pension arrangements, but asthey may well proceed to employment in Britain, it was decided not to excludethem from analysis. Nevertheless, attention will be drawn to this subgroup atappropriate points.

Within the sub-sample of British students, those who had attendededucation authority schools were more likely to provide correct responses tothese questions than their counterparts who had completed their education atindependent schools (x2 = 10.46; d.f. = 1; p < 0.01; x2 = 9.44; d.f. = 1; p < 0.05).For example, nearly 90 percent of the former group correctly stated men'sretirement age, compared to only 77 percent of students from independenteducation backgrounds.

The students were then asked what they thought the State pension agewould be by the year 2020. The aim here was to establish how many students


8/19

PersonnelReview30,4

392

had an awareness of the 1995 Pensions Act decree that female State pensionages will be synchronised with those for males by 2020. Just under one third ofrespondents correctly stated that by 2020 the State pension age for womenwould be raised to 65 years old to achieve parity with men. A notable

proportion of students felt that the future pension age would be 60 for bothsexes (22 percent; n = 101 for men and 20 percent; n = 91 for women), and 94respondents (20 percent of total sample) admitted that they had no idea. Asmight be expected, once again those students not from the UK were markedlyless likely to provide correct answers to these questions. Nevertheless, on thisoccasion there were no differences according to type of school education.

Knowledge of pension figuresIn addition to asking about retirement age, respondents were asked one furtherquestion to test their knowledge in this area. They were presented with threefigures 99.80, 149.80 and 199.80 and asked to indicate which theybelieved to represent the basic, State Old Age Pension for a married couple[1].At the time of the survey, the first of these was correct. However, this wasknown by only 43 percent (n = 195) of respondents; rather more (53 percent; n =241) believed the correct amount to be 149.80. The answers to this questionwere affected only by type of secondary education: those who had receivedindependent educations were more likely to opt for the higher amounts (x2 =15.97; d.f. = 2;p < 0.01).

Respondents' answers may well have been influenced by their perceptions ofthe amount of money required to live in a separate question it was revealedthat 47 percent considered that, assuming they had no accrued savings, a

married couple would require between 100 and 199 each week to live on;over half the respondents (51 percent) felt this should be over 200; and only asmall minority of 18 felt that less than 100 was sufficient. Similarly themajority of the sample considered that the corresponding levels of income tokeep a single person in retirement were between 100 and 300 per week. Theassociation between these two sets of figures (weekly income levels for singleand married people) was extremely high (r = 0.85; p < 0.001), indicating thatstudents were fairly consistent in their answers. Once again, those studentswho had previously been educated in the independent sector were more likelyto choose higher amounts.

It is notable that, even allowing for over-estimation of State pension figures,

students perceived weekly maintenance levels to be higher than those providedby State pensions. This may indicate some implicit recognition of the financialdeficiencies of the State pension, and the requirement to supplement it withadditional retirement income. This assertion is supported by the answers toanother question which sought views on whether or not the provision ofretirement pensions should chiefly be a matter for the State. Nearly half ofrespondents (48 percent; n = 218) disagreed with this assertion. Nevertheless, athird of the sample (n = 147) indicated that they felt pensions were chiefly amatter for the State.


9/19

``Thatcherchildren

39

Students' own retirement/pensionAlthough just over 57 percent (n = 260) of students reported that they hadgiven no serious thought as to when they wished to retire, one quarter ofrespondents indicated they would like to retire as soon as it becomes materially

convenient for them to do so. Only 23 individuals thought that they might liketo stay in employment as long as possible. Of those students who proposed adefinite retirement age, 13 considered 50 to be their ideal retirement age, 19opted for 55 and the remainder (n = 16) cited ages between 57 and 65.

Fewer students (24 percent; n = 108) claimed they had given any thought tothe issue of their retirement income or pension. Despite this indication of lack offorethought, more than two thirds (n = 310) of the sample felt that it wasimportant to organise their pension ``as early as possible''. In fact only 26respondents indicated that they would leave this until after they were 40 yearsold. Males and females differed in their opinions here (x2 = 12.34; d.f. = 3; p

“thatcher’s_children”,

Documents