Private pensions in the UK : coverage, contributions and consequences
Private pensions play a greater role in the UK than in other European countries, and recent reforms proposed by the Labour government envisage an even greater role for them in the future. Although low earners are still to have their retirement income provided for through the state, middle and higher earners are to provide the bulk of their retirement income through private pensions. This framework assumes that people are well-informed rational consumers who will choose to re-allocate their consumption over time, yet there has been little research effort to analyse current patterns of private pension accumulation in the UK. This thesis aims to bridge this gap by using the Family Resources Survey 1994-95 to analyse this voluntary behaviour. This is done with reference to five themes: coverage, adequacy, compulsion, rationality, and asset accumulation. The major part of the thesis uses both cross-tabulations and more sophisticated regression-based tools to analyse the constituent parts of pension accumulation. Private pension coverage is analysed for both occupational and personal pensions. The proportion making additional contributions and the amounts paid are also examined. The thesis also covers the employee contributions paid as a result of scheme membership. Pensions are not the sole means by which a stream of income can be built up and so the level of financial assets held is examined. In all cases the differences between various groups within the population are highlighted. The last part of the thesis draws together the disparate elements of pension accumulation to see what this behaviour might produce in terms of outcomes, using a simple stylised model. It also evaluates the research itself and possible future directions. Finally, the implications of the pension behaviour highlighted in this thesis for current government policy are considered.