Occupational pensions: Stephen Taylor
There is great variation in the arrangements that have evolved in diﬀerent countries for the provision of retirement pensions. The deﬁning characteristics of the UK system are its considerable complexity and the substantial proportion of retirement funding (40 per cent) which is funded through privately run pension funds, a good majority being sponsored by employers on behalf of their staﬀ (Emmerson 2002: 17). The UK’s state pension system is one of the least generous in the world, providing incomes worth just 37 per cent of average earnings, and yet, thanks mainly to the presence of occupational pension funds, retired people in the UK are not signiﬁcantly worse oﬀ than their counterparts in other countries (Pensions Commission 2004: 54, 68). In most OECD countries there is a far greater reliance on state pensions
funded on a pay-as-you-go basis (i.e. funded out of current taxation rather than from invested funds). Occupational pension funds are relatively few and far between, their coverage being limited to senior personnel in private companies. In an era in which the populations of the industrialised world are ageing markedly, the UK system is one which is being imitated by governments elsewhere planning for a future in which established levels of state pension provision will be more diﬃcult to maintain without substantial increases in taxation. Signiﬁcant expansion of private, funded pension provision is also a central objective for the UK government as it seeks to maintain current levels of spending on state pensions in the face of increases in the proportion of the population which is retired. The aim is to reverse the current ratio of provision so that by 2050 60 per cent of retirement income is privately funded and only 40 per cent provided by the state (Department of Social Security (DSS) 1998). The signiﬁcance of occupational pensions thus extends well beyond the concerns of the employers providing them and the employees who receive them. This area of reward management practice is the subject of one of the most important public policy debates of our time. This chapter starts by setting out the major forms that occupational
pension schemes take in the UK before focusing on the most signiﬁcant
contemporary trends and their causes. It goes on to debate the extent to which occupational pensions can play a part in meeting organisations’ HR objectives and how diﬀerent types of design may help achieve these. Finally our attention turns to the public policy debates and to the signiﬁcant ways in which government actions are likely to shape organisational practice in the future.