Personnel Review

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

survey evidence
Colin Duncan, Wendy Loretto, Phil White
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To cite this document: Colin Duncan, Wendy Loretto, Phil White, (2001),""Thatcher's children", pensions and retirement - Some
survey evidence", Personnel Review, Vol. 30 Iss: 4 pp. 386 - 403
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Personnel
Review
30,4
386
Personnel Review,
Vol. 30 No. 4, 2001, pp. 386-403.
# MCB University Press, 0048-3486
Received May 1999
Revised December 1999
Accepted March 2000
``Thatcher's children'',
pensions and retirement
Some survey evidence
Wendy Loretto, Phil White and Colin Duncan
ln/ters/lv c/ Ed/n/urgh, Ed/n/urgh, ln/led K/ngdcm
Keywords lens/cns, Rel/remenl, Ycung ec/e, ln/led K/ngdcm
Abstract Des/le ma/cr hanges /n lhe lK ens/cns sene, /n/ud/ng c//v /n/l/al/tes /v
suess/te gcternmenls, terv //ll/e /s /ncun a/cul ec/e`s all/ludes lcuards manv ens/cns
re/aled /ssues Recrls lhe resu/ls c/ a surtev c/ undergraduales, /crn cn lhe lhreshc/d c/ lhe
Thalher era, uhc are lhemse/tes a/cul lc em/ar/ ucn /n//uenl/a/ areers The //nd/ngs re/ale
/clh lc /ncu/edge c/ ens/cn and rel/remenl dela//s, and lhe sludenls` cun ens/cn and areer
/ans ln lhe s/r/l c/ lhe 1980s, lhe sludenls, ese/a//v lhe ma/es, allahed scme /mcrlane lc
/nd/t/dua/ hc/e`` /n ens/cn arrangemenls The need /cr a rc/e /cr lhe 5lale uas a/ncu/edged,
uh//sl cual/cna/ ens/cns uere ncl raled h/gh/v /n em/cvmenl hc/e lerms The ctera//
allern c/ rescnses a//cus /cr scme lenlal/te eta/ual/cn c/ reenl La/cur (cternmenl rccsa/s
and seu/al/cn c/ /ulure dete/cmenls /n lhe //e/d c/ rct/s/cn /cr rel/remenl
Introduction
There has probably never been a time in British socio-economic history when
more scrutiny was given to retirement from employment, and the provision of
retirement income, than in the past 20 years. As testament to this scrutiny, one
need 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 Provision
Group (PPG) (1998).
Among a plethora of retirement foci in the UK, three have been particularly
prominent. First, various calculations have projected a prospective decline in
the population at working age after 2010. This will have the effect of reducing
the 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, the
elderly 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). A
multiplicity of factors has contributed to this phenomenon. At one extreme, there
has been a positive option for relief from employment, greatly facilitated by
occupational pension benefits (Campbell, 1999). At the other extreme, employees
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The authors would like to thank the Department of Business Studies for its assistance with this
project. Especial thanks are due to Dr Jake Ansell, Katharine Angus, Terry White, and of course
to the undergraduates who participated in the survey. The authors also gratefully acknowledge
the helpful and constructive comments made by the anonymous referees on an earlier draft of
this article.
``Thatcher's
children''
387
(especially unskilled men) have been dismissed on grounds of age: employers
have literally found no further use for them (Campbell, 1999). Whatever the
reason along that continuum, ``early retirement'' has become a widespread
expectation even a ``right'' among a large segment of the working population.
Third, although of significance in their own right, rates of economic
inactivity are but a facet of a wider revolution in working patterns, including
the growth of self-employment, part-time work, and fixed-term contracts. The
greater the discontinuities which affect people's working lives, whether by
accident or design, the more problematic it may be for people to provide
financially for their retirement.
Against that background, this article is focused upon the attitudes and
perceptions of 460 undergraduates, who, arguably should have some
awareness of the various pension-related debates and controversies. The views
of a group of young people about to embark upon their careers is also of
significance to employers and policy-makers as today's undergraduates will
inherit the consequences of the current debates, and may be instrumental in
shaping their outcomes. However, before the findings are reported and then
discussed, the changing British pensions scene must first be sketched.
The British pensions scene
5lale ens/cns
Since the State Old Age Pension was first introduced in 1908, there have been
many changes in relative gender entitlement, as well as statutory supplements
to the basic State pension, including provisions under the National Insurance
Act 1959, and the addition of the State Earnings Related Pension Scheme
(SERPS) in 1978 (DSS, 1991, p. 9). However, there have been two developments
which are especially germane to this article. First, under the Social Security Act
1980, future annual increases in the pension were to be linked to the Consumer
Price Index, rather than to that for earnings, as had hitherto been the case. This
change has led to a slower annual increase in pension values. For example, in
1996 UK consumer prices stood at 222.8 (1980 = 100), compared to average
earnings at 291.4 (Kessler and Bayliss, 1998, pp. 46-7).
A further major change to State pensions was made in 1995. Under the
Pensions Act of that year, it was decided that women's State pension ages
should 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 men
and women in various pension arrangements (DSS, 1991, p. 56).
Oual/cna/ ens/cn shemes
Pensions provided by employers have existed in Britain since the nineteenth
century (Hannah, 1986). During the twentieth century, however, occupational
pension schemes have become more widespread, and increasingly sophisticated in
their administration, financing and investments. One recent estimate has placed
the value of UKpension funds at 650 billion (Incomes Data Services, 1997).
Personnel
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From the late 1960s until the early 1990s, the proportion of employees who
were members of an occupational scheme varied between 48 percent and 53
percent (PPG, 1998, p. 53), but such apparent widespread coverage masks certain
problematic issues. One concerned the lack of ``portability'' of pension rights
between jobs (Terry, 1988). Prior to 1975, those employees who left employment
and therefore a pension scheme had no rights under the law to transfer their
entitlements to another scheme, though transfer policies did operate between
public sector employers. Then, in successive legislative steps (Social Security
Acts of 1973, 1985, 1986, and 1990, and the Pensions Act 1995) attempts were
made to improve transfer rights, as well as to facilitate job changes insofar as
these were felt to be inhibited by transfer rigidities (OFT, 1997b).
Other problematic aspects of occupational pensions have centred around
facets of access. First, as can be inferred from the overall membership coverage
figures, some 50 percent of British employees have not been scheme members.
Women especially suffered from exclusion because of their employment
situations. For example, their more spasmodic working patterns have
aggravated the portability difficulty (DSS, 1996), and it was found by the EOC
(1996) that those in part-time employment (predominantly women) were more
likely to be with an employer who had no pension scheme. Second, until the
mid-1980s, employers could require that employees belonged to a scheme as a
condition of employment. Conversely, employers were under no obligation to
admit employees to membership.
Mindful of rigidities such as these, the Conservative Governments of the
1980s 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 the
Social Security Act 1986 prohibited employers from requiring scheme
membership as a condition of employment. This latter measure was especially
noteworthy because one of its objectives, driven by demographic changes, was
to free up people's choices over pensions, and to encourage alternative, non-
State pensions: that is, personal pensions.
lerscna/ ens/cns
One key to the recent developments to personal pensions (encompassing
appropriate 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 inducements
were offered, including tax credits over several years for those who switched out
of SERPS into a personal plan. Pension providers seized upon these business
opportunities with marketing campaigns fromthe mid-1980s on.
The various factors alluded to have clearly been successful in encouraging
personal pension contracts. According to one measure, well over five million
people have a personal pension arrangement (PPG, 1998), while the OFT
(1997a) estimated that such contracts covered 24 percent of all employees in
1991. As a corollary, it is probable that the extension of personal arrangements
``Thatcher's
children''
389
has contributed to a decline in occupational coverage: an estimate for 1995 put
the 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 ones
which have proved to be far inferior. Such mis-selling of personal pensions has
received critical attention from the regulatory authorities. Pension providers
have been required to make good prospective pension deficiencies, and well-
publicised fines have been levied (The (uard/an, 30 June 1998).
All/ludes lcuards ens/cns
Alongside the apparent acceleration of changes in, and attention to, pension
provision, it is somewhat surprising to observe that our grasp of people's
attitudes towards, and knowledge of, certain pensions issues is tenuous. We do
have some insights into pensions as a whole. In one such instance, the Goode
Committee discovered by survey that ``people are not well informed, even about
fairly 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 level
of weekly basic State pension.
We know next-to-nothing about citizens' approaches towards personal
pensions, in large part because this type of pension did not become widely
available until the boost of tax concessions in the late 1980s. By contrast, we
have a good deal more attitudinal information about occupational pension
schemes, but it is partial rather than comprehensive. For example, we have
some insights into employers' objectives for establishing and maintaining their
schemes (Casey, 1993; Taylor and Earnshaw, 1995; Terry and White, 1997).
Prominent among the perceived functions has been the recruitment and
retention of employees. These perspectives help to explain why employers
choose to contribute anything up to 25 percent of an employee's salary into a
pension fund, although the more typical amount tends to be 10 percent.
On the other hand, we have fewer data on employees' views. One exception
is again the Goode Committee evidence. A major advantage in the minds of
respondents was that employers contribute to (and hence could be said to
``subsidise'') occupational pension funds; a major perceived disadvantage was
that 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 survey
data among younger people. A major study undertaken in 1997 did focus upon
younger (i.e. 11-25 year-old) people's views on a wide range of issues, including
the world of work, but no questions were broached about retirement and
pensions matters (Industrial Society, 1997).
It could powerfully be urged that younger people's views on pensions matters
are likely to verge on the irrelevant: pensions are so distantly-oriented that such
views would be jejune in the extreme. On the contrary, younger people's views
are highly significant, for various reasons. First, there is an a priori case to
Personnel
Review
30,4
390
suggest that the earlier people prepare for retirement income, the greater will that
financial provision be: insights into young people's planning, albeit at an early
stage in their careers, are of value to policy-makers. Second, the views of people
born in the mid-1970s will throw some light upon the impact of a major
phenomenon of recent years, namely the Conservative and Thatcherite
hegemony from 1979 to the 1990s. Third, the eliciting of views of as in this
present study Business Studies undergraduates could be said to be revealing.
Such students, notwithstanding their ages, can be assumed to be more
informed about pensions issues than other young people (certainly than other
students) of the same age, rendering their responses to be of relevance. These
students are also on the threshold of careers where pension choices (e.g. personal
t/sa t/s occupational) might be salient. In addition they are likely to gravitate to
careers where pensions are an integral part of the motivational and reward
currency. Business Studies students could further be deemed to be an important
survey group when regarded as key policy-framers of the future, whether as
potential 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 a
survey to measure discriminatory attitudes towards older employees.
Survey results
I/e/ducr/ rcedure and sam/e dela//s
To redress the gap in information about younger people's knowledge of, and
attitudes towards, pensions and retirement issues, 460 undergraduates
studying Business Studies at the University of Edinburgh participated in a
questionnaire survey in Spring 1997. Questionnaires were distributed in
lectures across each of the four years of the degree. Participation was
voluntary, but as far as could be determined, everyone present at the lectures
agreed to complete a questionnaire. The resulting sample of 460 students
constituted nearly 77 percent of those registered for the degree. The
respondents ranged in age from 17 to 29 years, with the majority aged either 19
or 20. The pattern of ages across the university years was as expected, i.e. more
older students in the later years. The gender composition of the sample (55
percent male and 45 percent female), although slightly under-representative of
females and over-representative of males registered for the Business Studies
degree course, was consistent across all four years.
Further information about each respondent, relating to their socio-economic
status, was obtained from details about education prior to attending university.
The 38 students who had completed their secondary education outside the UK
were excluded from this measure (and thus from subsequent analysis on school
type). Amongst the UK students, the sample was split almost evenly between
those 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 for
two reasons: firstly there was a larger number of non-responses to the question
``Thatcher's
children''
391
on parental employment, and secondly the answers provided indicated strong
homogeneity of occupational status, with, for example, 81 percent (n = 344) of
students stating that their fathers were employed (or had been most recently
employed) 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 of
socio-economic status of young people (Loretto, 1994; 1997).
The effects of gender and educational background of the respondent on all the
issues of interest were investigated, and, where appropriate, inter-relationships
between the discriminator variables were also taken into account. Two points
should be noted at this stage. The first is that distributing the survey instrument
via lectures, although a convenient mode of administration, resulted in
(unintentional) self-selection into the sample as non-attendees did not complete a
questionnaire. However, as spontaneity of responses and lack of collusion were
deemed to be of paramount importance, it was decided not to revisit subsequent
lectures. Second, it is acknowledged from the outset that these respondents
cannot be said to be representative of undergraduate students in general.
However, their selection can be justified on the grounds that they constitute a
group who are likely to become the senior managers and policy-makers of the
future. This assertion is supported by the students' responses when asked to
provide 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.
Kncu/edge c/ ens/cn ages
The students were asked what they thought the current State pension age was
for men and for women. The majority of respondents answered correctly, with
79 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. Ninety
individuals (nearly one fifth of the group) thought that women too retire at age
65. Not surprisingly, it was shown that those students who had not been
previously educated in the UK were substantially less likely to provide correct
answers to these questions. It could be argued that there is no particular reason
why these individuals should know about UK pension arrangements, but as
they may well proceed to employment in Britain, it was decided not to exclude
them from analysis. Nevertheless, attention will be drawn to this subgroup at
appropriate points.
Within the sub-sample of British students, those who had attended
education authority schools were more likely to provide correct responses to
these questions than their counterparts who had completed their education at
independent schools (x
2
= 10.46; d.f. = 1; < 0.01; x
2
= 9.44; d.f. = 1; < 0.05).
For example, nearly 90 percent of the former group correctly stated men's
retirement age, compared to only 77 percent of students from independent
education backgrounds.
The students were then asked what they thought the State pension age
would be by the year 2020. The aim here was to establish how many students
Personnel
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had an awareness of the 1995 Pensions Act decree that female State pension
ages will be synchronised with those for males by 2020. Just under one third of
respondents correctly stated that by 2020 the State pension age for women
would 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 both
sexes (22 percent; n = 101 for men and 20 percent; n = 91 for women), and 94
respondents (20 percent of total sample) admitted that they had no idea. As
might be expected, once again those students not from the UK were markedly
less likely to provide correct answers to these questions. Nevertheless, on this
occasion there were no differences according to type of school education.
Kncu/edge c/ ens/cn //gures
In addition to asking about retirement age, respondents were asked one further
question to test their knowledge in this area. They were presented with three
figures 99.80, 149.80 and 199.80 and asked to indicate which they
believed 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 was
known 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 question
were affected only by type of secondary education: those who had received
independent educations were more likely to opt for the higher amounts (x
2
=
15.97; d.f. =2; <0.01).
Respondents' answers may well have been influenced by their perceptions of
the amount of money required to live in a separate question it was revealed
that 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 a
small minority of 18 felt that less than 100 was sufficient. Similarly the
majority of the sample considered that the corresponding levels of income to
keep a single person in retirement were between 100 and 300 per week. The
association between these two sets of figures (weekly income levels for single
and married people) was extremely high (r = 0.85; < 0.001), indicating that
students were fairly consistent in their answers. Once again, those students
who had previously been educated in the independent sector were more likely
to 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 provided
by State pensions. This may indicate some implicit recognition of the financial
deficiencies of the State pension, and the requirement to supplement it with
additional retirement income. This assertion is supported by the answers to
another question which sought views on whether or not the provision of
retirement pensions should chiefly be a matter for the State. Nearly half of
respondents (48 percent; n = 218) disagreed with this assertion. Nevertheless, a
third of the sample (n = 147) indicated that they felt pensions were chiefly a
matter for the State.
``Thatcher's
children''
393
5ludenls` cun rel/remenl/ens/cn
Although just over 57 percent (n = 260) of students reported that they had
given no serious thought as to when they wished to retire, one quarter of
respondents 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 like
to stay in employment as long as possible. Of those students who proposed a
definite retirement age, 13 considered 50 to be their ideal retirement age, 19
opted 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 to
the issue of their retirement income or pension. Despite this indication of lack of
forethought, more than two thirds (n = 310) of the sample felt that it was
important to organise their pension ``as early as possible''. In fact only 26
respondents indicated that they would leave this until after they were 40 years
old. Males and females differed in their opinions here (x
2
= 12.34; d.f. = 3; <
0.01) 77 percent of female respondents, as opposed to only 63 percent of
males, chose the option of as early as possible. At the other end of the spectrum,
males were more likely to leave the organisation of their pension until after
they were 40. This variable was also independently affected by educational
background: in general those who had attended education authority schools
wished to organise their pensions as early as possible, or at a younger age, than
their counterparts fromindependent schools (x
2
= 9.2; d.f. =3; <0.05).
The students were also questioned about the type of pension they would like
to receive[2]. Again, a significant proportion of respondents (29 percent; n =
130) felt it was too far in the future for them to have given the matter any
thought. Of the remainder, the most popular option was a personal pension;
nearly 43 percent of the sample chose that as their preferred pension type. Just
over 100 students (24 percent) opted for an occupational pension, whilst a mere
4 percent indicated that a State pension would be their ideal choice. Patterns of
response here were affected by gender (x
2
= 22.01; d.f. = 3; < 0.001), and
educational background (x
2
= 7.00; d.f. = 3; < 0.05). The gender differences
showed that male respondents were more likely than the females to prefer a
personal pension, whilst the women were more likely to claim that they felt the
issue was too far in the future to have given it thought. As regards educational
background, students who had previously been educated in the independent
sector were less likely than their peers who had attended education authority
schools to express a preference for either a State or occupational pension, and
instead to choose a personal pension.
Similar gender differences to those connected with choice of pension were
apparent in relation to the amount respondents would be prepared to save
towards the provision of a pension. Overall, 88 respondents (19.6 percent of the
group) thought this was too far in the future to be able to provide an answer.
However, the females in the group were twice as likely as the males to give this
response (x
2
=9.82; d.f. =4; <0.05).
Most students (45.5 percent; n = 204) indicated that they would be prepared
to save between 5 and 10 percent of their annual earnings towards their
Personnel
Review
30,4
394
pension. Only five individuals wished to commit themselves to saving more
than one fifth of their annual salaries. Full details of responses are provided in
Figure 1.
In relation to making financial provision for one's retirement, 55.4 percent
(n = 251) of the students supported the idea of making retirement savings
schemes compulsory by law. This suggestion received greater support fromthe
females than from the males in the sample (x
2
= 7.09; d.f. = 2; < 0.05). Despite
this support there was less agreement with the suggestion of paying extra tax
to improve State retirement pensions. In this case, only 23 percent (n = 103) of
the group indicated they would be willing to enhance their pensions (or,
perhaps those of existing pensioners) in this way. Once again there were
significant differences between the responses provided by males and females
(x
2
= 8.28; d.f. = 2; < 0.05). Males were more likely to disagree with this idea
(57 percent of males compared to 47 percent of females) while the females in the
group were markedly more likely to state that they were unsure about this
notion (31 percent of females as opposed to 20 percent of males). On this
occasion there were also differences relating to respondents' secondary
education (x
2
= 18.56; d.f. = 2; < 0.001): those respondents from education
authority backgrounds were more than twice as likely as students who had
attended schools in the independent sector (32 percent as opposed to 15 percent)
to agree with the suggestion of paying extra tax to support State pensions.
5ludenls` areer /ans
The survey instrument also included a range of questions asking students
about their career plans. Although the bulk of their responses are discussed in a
separate article on undergraduates and the labour market, particular items are
relevant to this paper too. Students were asked whether they envisaged being
self-employed at some point in their future careers. Almost half of the group
(n = 211; 46 percent) responded positively. Only 28 percent (n = 127) thought
they would not be self-employed in the course of their careers, the remaining
Figure 1.
Amount of salary to be
saved towards pension
``Thatcher's
children''
395
26 percent choosing the ``unsure'' response. Although this intent did not appear
to be influenced by choice of career, gender did have a marked impact on the
pattern of responses: males were much more likely than females to indicate that
they may be self-employed at some point in their future careers.
In addition, a further significant effect was observed in relation to
educational background of respondents. The group who had been educated in
the independent sector were markedly more likely to express a desire to be self-
employed at some point in the future (x
2
=11.55; d.f. = 2; < 0.01).
Three-way analysis of self-employment by both gender and type of school
education revealed that the gender differences observed above were only
apparent amongst those respondents who had attended education authority
schools. Here, half of all males stated that they wished to be self-employed,
compared to only 22 percent of females (x
2
= 17.39; d.f. = 2; < 0.001). The
differences between males and females educated in the independent sector were
not statistically significant, and could therefore have been attributed to
sampling error.
Further analysis showed that students' attitudes towards their plans for
retirement did not appear to be affected by their choice of career. Nevertheless,
intentions to become self-employed in the future did have a significant effect on
some of the variables associated with provisions for retirement. First, it was
revealed that those respondents who thought they may be self-employed in the
future also exhibited a preference for a personal pension (x
2
= 14.85; d.f. = 6;
< 0.05); 49 percent who answered yes indicated this pension preference as
compared to only 33 percent who thought they would not be self-employed
during the course of their career. It was also of interest that those intending to
be self-employed were also more likely to wish to save larger amounts of their
salary towards that pension (x
2
=18.61; d.f. = 8; < 0.05).
Given that it was previously shown that males were more likely than
females to prefer a personal pension, and that males were also more likely to
express a wish to be self-employed in the future, it could be inferred that this
preference for personal pensions exhibited by males was directly attributable
to their intent to be self-employed. Thus, to test whether a genuine gender
difference did occur in choice of pension, a three-way crosstabulation was
undertaken. The results of this revealed that the tendency for more males than
females to prefer personal pensions was independent of the desire to be self-
employed. It was also revealed that the gender differences were most marked
amongst those people who did wish to be self-employed in their future careers:
within this sub-group, 56 percent of males expressed a preference for a personal
pension, compared to only 36 percent of females.
On the other hand, the three-way analysis examining the effects of school
type and the desire to be self-employed on pension choice revealed no
significant differences. As a result, it may be concluded that the finding that
students from independent school backgrounds preferred personal pensions is
associated with the fact that they are also more likely to wish to be self-
employed at some point during their careers.
Personnel
Review
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396
Another career orientated question which also had relevance to the topic of
pensions asked the students to rank a number of factors which could
influence their job choice. These included the provision of an occupational
pension. Students were asked to assign a number to each item, the numbers
ranging from 1 indicating that they considered that item to be essential to
their job choice, to 6, indicating the complete irrelevance of that aspect of
employment. The full list of items and their overall rankings are presented in
Table I .
In summary, the availability of occupational pensions was not a big draw to
the students participating in this survey; their rankings placed it eleventh out of
14 items. As can be seen from Table I, this position was well beneath other
aspects of the remuneration package such as pay and merit related reward. The
perceived lack of importance attached to the provision of an occupational
pension is supported by the low proportion of students (34 percent) who rated it
as essential or very important in their search for jobs post graduation.
Discussion of results
The aim of this survey was to explore the pensions-related knowledge and
attitudes of a group of young people, the majority of whomhad been born in the
mid-1970s. Mindful of their youth, therefore, one point to be stated at the outset
is that it is likely that this was the first time that the respondents were required
to give some thought to pensions-related topics. It is perhaps not surprising
that many had given no consideration as to when they wished to retire or how
they might provide financially for their retirement. This ``disengagement'' also
manifested itself in the degree of ignorance over State pension ages,
particularly the changes that would be effective from2020, i.e. will have been in
place for some years by the time the respondents are retiring. Such uncertainty,
especially amongst the females who are the group directly affected by the
Aspect of employment Mean rank
Percent of essential
and very important
responses
Promotion opportunities 1.81 85
Training opportunities 2.06 70
Good pay 2.08 69
Job security 2.23 65
Creative work 2.38 56
Reward based on merit 2.38 59
Location 2.54 51
Responsibility 2.55 49
Travel opportunities 2.70 48
Social climate 2.87 38
Occupational pension 2.91 34
Contribution to society 3.35 21
Age profile 4.05 8
Table I.
Relative importance
attached to factors
influencing job choice
``Thatcher's
children''
397
legislation, was not expected, given the recent publicity and controversy
surrounding the 1995 Act.
In general, the respondents' estimates of the level of State pension provision
were rather generous. As discussed earlier in this article, ignorance of and
disengagement from aspects of pension provision are by no means restricted to
the age group being considered here. For example, in a survey of working
adults, the OFT (1997a) found that not even one third of respondents thought
that single pensioners received a weekly basic State pension within about 5 of
the true figure, whilst just over a quarter thought that a married pensioner
couple, living together, received a weekly basic State pension within 8 of the
true figure then prevailing.
Moreover, it can be seen that the students' guesses, as well as their estimates
of suitable levels of income, bore a close relationship to both assessments of
students' financial requirements and estimates of ``comfortable'' retirement
income made in other contexts. A recent NatWest survey put students' reports
of total expenditure at the equivalent of over 130 per week (The (uard/an, 19
August 1998). An earlier survey from the same source established a
``comfortable'' weekly retirement income for pensioners at 179 (The (uard/an,
18 February 1998), whilst the Director General of Age Concern was reported as
claiming that pensioners needed 150 per week for a ``modest lifestyle'' (The
(uard/an, 18 July 1998). This apparent symmetry between pensioners' and
students' estimates of suitable income levels suggests that the two groups,
whilst at the extremes in age terms, are similar in lifestyles. They tend to live
and spend in the present, but, because of their limited incomes, they are prone
to be very aware of weekly, and even daily, outgoings.
Thus, it can be contended that, despite some manifestations of uncertainty, the
students revealed (albeit tentatively rather than in fully articulated fashion) a
very consistent and coherent set of views and attitudes. This would indicate that
the respondents in the survey have a clear idea, albeit an intuitive one, of how
their career choices will affect their financial preparation for retirement. The
strong preference for personal pensions over the occupational form, and even
more the State vehicle, fitted neatly the archetypal ``Mrs Thatcher's generation''
of individualistically inclined young people. This was emphasised by the
seemingly contradictory findings which indicated that, although one third of
respondents considered that pensions generally were chiefly a matter for the
State, only 4 percent wished their own retirement to be funded primarily from
that source. Most of the respondents have grown up in a climate of political,
legislative and acquisitive individualism (Kessler and Bayliss, 1998, pp. 60-1).
Recent Government intervention, in the formof the Welfare Reformand Pensions
measures 1999, can be viewed as extending the individualistic options.
The students' choice of pension was closely associated with projected career
pattern, with those who thought they may be self-employed in the future being
more likely to opt for a personal pension, and also thinking that they may want
to save a greater amount of their salary to fund their retirement. The relative
lack of preference for occupational schemes was consistent with the small
Personnel
Review
30,4
398
number of respondents who considered occupational pensions to be influential
in job choice. It is interesting to compare this finding with the results from
previous research, the vast bulk of which has focused upon employers (Terry
and White, 1997). First, as was discussed in the introduction, surveys of
employers have found that recruitment and retention of employees have been
prominent among perceived functions. Second, managers have a belief that
pension schemes fulfil various objectives, but they have little evidence to
support those beliefs. Accordingly, the students' perspectives reported here do
not lend weight to managers' convictions.
Among our fulfilled preconceptions included the mere handful of students who
thought of staying in employment for as long as possible. The growing
phenomenon of early retirement among employees in Britain was referred to earlier
in this article. The respondents' preferences for retirement well before the State
retirement ages merely echo other survey evidence among the (older) labour force.
It is clear from the data contained in Table II that the younger the
respondents, the earlier people expected to retire. In their responses, the
students could therefore be said to be reflecting the spirit of the age. As regards
saving for this ``early'' retirement, it was seen that only one quarter of students
proposed to contribute more than 10 percent of their salary towards a pension,
in whatever form. Although systematic information pertaining to levels of
contributions is lacking, as an indication the National Association of Pension
Funds (NAPF) survey of 1995 found that for contributory occupational pension
schemes, average total (employee and employer) contribution was 11.7 percent
of salary (NAPF, 1996). The students' responses could therefore be interpreted
as potentially underestimating their retirement needs.
Although it is acknowledged that the respondents were, in the main, from
fairly privileged backgrounds, educational background as a measure of socio-
economic status provided some illuminating insights into differences in
attitudes and preferences. Students who had previously been educated in the
State sector showed a greater awareness of State retirement ages and exhibited
a better knowledge of the levels of pensions. They also held a firmer belief in
the equality of retirement ages and were more likely to agree with the
Expected age of retirement
Those currently:
Current age In paid work Not in paid work
30-34 59.1 60.7
35-39 59.7 61.5
40-44 60.4 61.6
45-49 60.8 62.9
50-54 61.3 62.4
55-59 62.6 62.6
60-64 65.3 67.3
Source: McKay and Middleton (1998, p. 61)
Table II.
Age people expect to
retire
``Thatcher's
children''
399
suggestion of paying extra tax to boost the State pension. As far as their own
futures were concerned, they were more likely to prefer an occupational or even
a State pension than were their peers who had attended independent schools.
They also maintained that they wished to organise their pensions earlier in
their careers. Furthermore, it was shown that this sub-group was less likely to
express a desire to be self-employed in the future, and that this was associated
with pension choice. Thus, overall, it may be concluded that the stereotypes
attached to the two educational sectors were being portrayed through their
answers with those fromeducation authority backgrounds displaying greater
consideration of social justice and welfare, and even some evidence of being
less self-confident and individualistic.
The other discrete variable of interest was gender. The results illustrated a
greater degree of ambivalence amongst the females. In general the females in
the sample wished to organise their pensions earlier in their careers and
exhibited firmer belief in compulsory saving for retirement. However, when it
came to deciding on type of pension, they were more likely to feel the issue to be
too far in the future to have given thought to it. Males, on the other hand, were
more likely to choose personal pensions and also displayed a greater wish to be
self-employed in the future.
There are several possible ways of interpreting these gender differences: one is
that the males were displaying greater self-confidence and a greater self-belief;
that the women were manifesting uncertainty because of possible career breaks in
the future. An analysis of optimism about future job prospects showed that the
women in the group were much less optimistic about their chances of getting a job
post-graduation. Other research amongst undergraduate students has provided
support for the pessimistic interpretation of gender differences. For example,
Purcell and Pitcher (1998) found that when final year students were asked to
evaluate howtheir enterprise or business skills had developed in higher education,
males on average consistently rated themselves higher than did females[3].
In addition, other equally valid interpretations could be placed upon the
divergent pattern of responses. One is a regard for social welfare and justice. It
is possible to see, in the greater female agreement for additional taxation (of
themselves?) to increase State retirement pensions, the notion of support for
one's own generation, and for older people too. The female responses might
therefore be regarded as more altruistic in tone. In their responses, the females
may well also have been manifesting more pragmatic and realistic orientations.
Whilst the male students tended to opt in greater numbers both for self-
employment and personal pensions, we do know that the self-employed in
Britain, when left to their own devices, do not seem inclined to contract
personal pensions, so much so that a report in 1998 concluded that the self-
employed may have to be compelled to plan for a second pension (PPG, 1998).
Conclusions and implications
We recognise the limitations in generalising the results beyond an especial
group of young people, restricted not least in terms of socio-economic status
Personnel
Review
30,4
400
and employment experience. For example, nearly half of the sample envisaged
being self-employed at some point during their career, which is a figure
substantially higher than the proportion of the current working population (12
percent) in self-employment (Labour Force Survey figures, September 1999).
Moreover, other recent survey evidence indicates that self-employment is
favoured by only 2.7 percent of graduates as a career option three years post-
graduation (Elias el a/, 1999). This finding may affect the generalisability of
our results, in that a wish to be self-employed was associated with a preference
for a personal pension. However, as our question did not focus on the
respondents' immediate career choice post-graduation, but rather asked them
to consider aspirations for the course of their career, these differences may be in
part attributed to methodological peculiarities.
Despite these limitations, the findings fromthis survey would seemto be in line
with the broad changes characterising the current British pensions scene. Firstly
there appears to be a good deal of support for the notion of the State pension as a
diminishing asset in terms of financial provision for retirement. A key element of
Conservative policies post-1979 was a rolling back of the State: a progressive
``devaluation'' of the State pension from1980 was symbolic of a wider denigration.
This could not but have an impact on the thinking of younger people who had
known no other, especially those who were raised in a home and educational
environment which may well have reinforced that image. Moreover, the recent
decline in popularity of occupational schemes could be subject to a further
downward twist, with employee preference instead shifting into the sphere of
personal pensions. A further implication of these findings is that the outcomes of
measures taken to ensure equality between the genders equalising State pension
ages on one hand and ensuring equality of access to occupational schemes on the
other may not have permeated prospective recipients' consciousness.
Although the law has rendered portability more of a feature of occupational
pensions, it is notable that that particular feature is a more obvious attraction
of personal schemes. What has been made abundantly clear in this survey is
that these prospective managers and employers do not perceive pensions to be
an integral part of the reward structure of their future employment, and instead
appear to have embraced Conservative concepts of ``choice'' and
``individualism''. There is no evidence here that the mis-selling of personal
pensions scandal has discouraged this form of pension provision amongst
young people on the threshold of their careers.
Even within the relatively brief period since the survey which is reported
here, the debate on pensions and retirement has moved on apace. The Labour
Government has played a prominent role, in several ways. It has developed the
concept of ``stakeholder pensions'', targeted at those earning between 9,000
and 18,500 per annum. By April 2001, the plan is for such pension
arrangements to be widely available to those who otherwise would not have
access to a workplace-related pension. Labour also decided in August 1999 to
revert to the status quo ante 1986: membership of occupational pension
schemes, where they existed, would again be rendered a condition of
``Thatcher's
children''
401
employment (The (uard/an, 14 August 1999). These moves point to a potential
deepening of the pension regime, which also signifies a wider array of choices.
It becomes increasingly important, therefore, that the wishes of employees are
clearly discerned: that responsibility may fall to some of the respondents in this
survey in their future roles as managers and policy-makers.
Against that background, and the apparent demographic inexorability
which was noted at the outset of this article, the NAPF has called for an
increase in the State pension age to 70 (The (uard/an, 5 October 1999). The
Association's argument, which attracted much criticism, was that people would
thereby have longer in employment to accumulate a bigger fund for their old
age. It is possible that the future UK government would, indeed, be tempted to
ratchet up the age when the State pension falls due. This would, in part, also be
designed to restrain public expenditure. Whether such a plan would affect the
thinking of younger people is open to question: it is interesting to speculate
whether ``Blair's Babies'', due to have attained their adulthood by 2020, will
have a mindset which is very different to their Thatcherite predecessors who
were the subject of this survey. What is definite is that our respondents'
attitudes towards retirement are part of a more widespread concern that:
``younger people are still not taking pensions seriously even though it takes
most people 40 years to save for an adequate retirement'' (Monks, 1999).
Another future imponderable concerns the world of work. The incidence of
early retirement might prevail and even intensify: the undergraduate
respondents certainly seemed to expect that at the very least for themselves.
However, a variety of forces could begin to work in the other direction. After
all, some 40 years ago, a considerable number of people worked beyond the
State pension age (Ministry of Labour, 1952). This reversal of the early
retirement phenomenon, far weightier in its socio-economic impact, could stem
from people finding it increasingly difficult to support themselves adequately
over a retirement span of 25 years or more. This could arise because investment
frompension funds (both occupational and personal) may be incapable of being
sustained. For their part, employers may decide to retain employees into older
age. Acombination of perceived positive attributes among older workers, and a
shortage of younger workers, may come into play. Furthermore, the apparently
incessant dislodgement of older workers by employers may come to be viewed
as unambiguously discriminatory. Whilst the current Labour Government has
set its face against statutory intervention (DfEE, 1999), a future administration
may decide to act, if only because of the political clout of those who deem
themselves to be unfairly treated.
The study reported here has focused upon one segment of the (potential)
working population. Perceptions of employees across the various generations,
as well as those on the threshold of their careers and employment, are likely to
be highly informative in guiding the corporate and governmental policy-
making processes, as truly momentous decisions are planned and taken in this
country over the next fewyears.
Personnel
Review
30,4
402
Notes
1. For accuracy, it should be noted that this amount did not actually apply to all married
couples, but only in the following circumstances: the husband was entitled to the full single
pension; and his spouse had either no entitlement in her own right, or her entitlement was
a ``dependant's increase''. However, for the purposes of this survey, it is believed that the
term ``Old Age Pension for a married couple'' was sufficient.
2. This was, of course, a somewhat unreal question, in that people are not necessarily
restricted to the choice of one source of retirement income, as implied in the question.
Rather, the question aimed to throw light on the students' basic instincts: to determine
what sort of pension most closely fitted the images of themselves and of their prospective
life-styles.
3. The attributes were as follows: entrepreneurial skills; interpersonal skills; knowledge of
international affairs; leadership skills; presentation skills; time management; ability to
prioritise tasks; ability to work in a team.
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