Orla Gough

Pensions and retirement savings: cluster analysis of consumer behaviour and attitudes

Purpose - The aim of this article is to obtain a better understanding of peoples motivation and behaviour with respect to provision for their retirement. Design/methodology/approach - This study examines variation in behaviour and attitudes towards pensions and retirement saving among consumers of financial service products, using data from a questionnaire survey. Findings - A cluster analysis indicates that consumers can be divided into six clusters, with distinctive demographic, economic, behavioural and attitudinal traits for each cluster. Of particular interest is the finding that members of two of the clusters reported a general tendency to be in debt in the short term, whilst at the same time putting money away for retirement through either a company pension or voluntary regular saving. Research limitations/implications - The data set is composed of people who enquired about products offered by the financial services industry. This makes the findings by definition relevant to marketing pensions and retirement savings products to this set of people. It is not clear to what extent they apply to the population as a whole; this would be a useful further study. Originality/value - The key contribution of this study is that the identification of target groups could ultimately lead to enhanced abilities for pension providers to develop customised pension and saving products for those groups.

The impact of the gender pay gap on post-retirement earnings

This article examines the factors affecting womens earnings during their working years that go on to affect their earnings in retirement. In particular, it argues that factors relating to part-time working, career patterns and types of occupation and employment contribute not only to keeping womens income lower than mens during their working life, but also to a reduced entitlement to benefits from occupational pension schemes after retirement. When the effects of womens greater longevity are also taken into account, a picture emerges of an increasing number of women facing poverty either in old age or in extreme old age. Using data from the Labour Force Survey, the variations in pay between men and women are analysed, providing results which in turn help to explain the differences in post-retirement income. It is argued that occupational pension schemes, most of which were constructed with the needs of the long-serving male breadwinner in mind, could be made more appropriate to the very different needs of female employees in a much more mobile and flexible pattern of employment.

Employee evaluations of company occupational pensions: HR implications

Having discussed the growth and current status of company occupational pensions and the claimed role of pension provision in fostering employee loyalty to an organisation, this paper reports the findings of a research study that investigated employees’ perceptions of these types of pension scheme, a perspective that has hitherto been somewhat neglected. The findings show that, although employees had joined a company scheme largely automatically as a concomitant of employment, their current assessments of, and concerns about, different aspects of occupational pension schemes are framed in more nuanced, instrumental and individualistic terms: the attractive features of these schemes are not so much those that provide security for the employee as “breadwinner” and their dependants as those that offer a cost‐effective way for the individual to build up a fund for their own, possibly early, retirement. Company pension schemes are seen more as contingent private transactions than as part of long‐term stable commitments by and to an employer. On the basis of this evidence, it is argued that, if the employer is perceived as merely one possible pension provider among many, any link between pension provision and employee loyalty or commitment, a link that was always tenuous, is extremely fragile.

Why do employees, particularly women, reject occupational pension schemes?

An integral part of government policy is to encourage employees to make financial provision for retirement. This paper asks why eligible employees, particularly women, do not join their company schemes. This two-stage study uses face to face interviews followed by a survey of 532 employees who have chosen not to become members of their company schemes. Findings highlight personal pension ownership and a requirement for flexibility and pension portability as the key reasons for non-membership. The dominant reason given by women was the expectation that a partner would provide in retirement.

Ethnic minorities, retirement planning and Personal Accounts

Purpose – The purpose of this paper is to examine issues relating to public and private pensions for individuals from some of the major ethnic minority groups in the UK. Design/methodology/approach – The paper draws on data from in-depth interviews and focus groups with 64 respondents from the six largest ethnic minority groups in the UK, as well as from a white British control group. Findings – The research found that a belief in the need for retirement planning was held by respondents of all backgrounds, that there was a widespread view that state pension should be increased to a more adequate level, and concern amongst some respondents that they would be unable to receive retirement income from pension schemes if they were to retire in another country. Research limitations/implications – The limitations of the research largely concern the limited sample of respondents (n?=?64), the use of English in all interviews and significant reliance on the internet in order to contact potential respondents. Practical implications – It is suggested that more widespread information about retirement planning is needed in minority ethnic media and that in promoting the forthcoming scheme of Personal Accounts, the government should make clear the extent to which the scheme will allow members to receive retirement income in another country, for those who choose to retire abroad. Originality/value – The paper contributes new information about attitudes to the forthcoming scheme of Personal Accounts, and explores retirement strategies of ethnic minority individuals in the UK.

The Leverage Effect on Stock Returns

This paper examines the relation between abnormal stock returns and leverage. Expanding on Modigliani and Miller’s (1958) Proposition II, abnormal returns are estimated using the asset pricing models of Sharpe and Lintner (the traditional Capital Asset Pricing Model, CAPM), of Fama and French and of Carhart. The findings indicate that returns are decreasing in firm leverage. This paper tests this relation empirically with other risk factors and finds that the results remain robust. The results show that leverage is a firm characteristic that loads on a risk factor. This evidence suggests that leverage should be priced as a risk factor and requires adequate incorporation into common asset pricing models.

Corporate reporting implication in migrating from defined benefit to defined contribution pension schemes: A focus on the UK

Abstract Pensions are intricately linked to employees’ well-being in the latter part of their life and during their working life in that they provide a sense of financial security in retirement. Since the 1980s, pension schemes have changed both in concept and detail with significant consequences for beneficiaries. This paper explores one of the major changes: the migration from defined benefit (DB) to defined contribution (DC) pension schemes focusing on this changes interface with accounting. In exploring this shift from DB to DC schemes, the paper uses a critical perspective to reflect on this interface including how the change is accounted for in corporate reporting narrative. The key focus is on issues of political economy: it is found in this respect that while wealth is effectively distributed from pension holders efforts are made to legitimise or displace attention from pension changes. An analysis of narratives of corporate annual reports is undertaken to critically explore corporate communication to stakeholders vis-à-vis pension scheme changes. Findings suggest limited and problematic engagement with employees as per the corporate annual report narrative. We also point to a lack of appetite on the part of existing employees to engage employers on these changes. The change is framed to give workers an impression that they are taking responsibility for their future whilst an alternative view is that in actuality the organisation is decoupling from pension responsibility and devolving associated risks to employees for greater profitability. Counter accounting may be a way forward.

The impact of the shifting pensions landscape on the psychological contract

Purpose – Changes in employment contracts and the provision of occupational pension schemes together with the Employment Equality (Age) regulations are likely to impact on the psychological contract between employers and employees. This paper aims to investigate the potential nature of this impact.Design/methodology/approach – The role of DB and DC pension schemes are examined. The psychological contract, e.g. the employers promise to the employee of a certain pension outcome in return for long‐term loyal service and sense of loyalty and commitment, have prompted employers to rethink.Findings – DC pensions do not reward workers who have risen through an organisation in the same way as DB schemes and are generally less expensive. It is argued that employers have shifted their emphasis from the relational component of the psychological contract to the transactional. In contrast with the difficulties that the Regulations may create for employers, they provide greater flexibility and choice to those who, for...

Pension reforms and saving for retirement: comparing the United Kingdom and Italy

Increasing longevity and falling fertility rates have prompted European policymakers to shift the responsibility for retirement funding to individuals. Governments, independently of their political ideologies, are committed to sustainable pension systems by encouraging private saving for retirement. This article uses a quantitative approach to investigate individual saving behaviour in Italy and in the UK and present evidence of the factors determining saving for retirement in the two countries. We question whether differences in pension policies and attitudes are accentuated or lessened by common demographic and social factors and examine the possibility of cross-national saving policies. Our analysis suggests that cohorts identified by homogeneous demographic features present converging perceptions across both countries, by acknowledging the need to save for retirement and the insecurity of future state pensions. However, our findings also show that English respondents make use of private saving for their retirement significantly more than their Italian counterparts.

Welfare Systems and Adequacy of Pension Benefits in Europe

During the post-war years many European countries have implemented far-reaching but diverse pension systems with the objective of providing those in retirement with adequate incomes. In this study, we explore the link between pension systems and the adequacy of retirement income. We analyse the mix of public and private pensions and consider the impact of different policies on poverty rates amongst pensioners. We suggest that only a few European countries have been successful in providing combinations of private and public pensions that improve the adequacy of retirement income.