Personal Pension Take-up in the 1990s in Relation to Position in the Labour Market

Abstract

Pension reform in Western societies has sought to shift the balance of provision towards the private sector. In Britain, the 1986 Social Security Act marked a watershed in privatisation by promoting personal pensions while cutting the value of the State Earnings Related Pension Scheme. The article assesses the effects of the Act, especially the different implications according to gender and position in the labour market. Data from the 1993/4 and 1994/5 General Household Surveys is used to examine the changing pension arrangements of employees. We distinguish between personal pension membership among those who rejected the opportunity to belong to an occupational pension and those for whom this option was not available. The extent to which personal pensions were taken up by the intended target group or by those unlikely to benefit is assessed. Rejecting membership of an occupational pension scheme was associated with labour market disadvantage but those who opted for a personal pension were more advantaged than those who remained in SERPS. Among those lacking access to an occupational pension scheme, take-up was higher among younger and more advantaged employees. However, a substantial proportion of personal pension contributors were low paid, especially among women employed part time, illustrating the extent of mis-selling of personal pensions to those who are likely to have been better off in SERPS.