Employee evaluations of company occupational pensions. HR implications
| Published date | 01 June 2003 |
| Pages | 319-340 |
| Date | 01 June 2003 |
| DOI | https://doi.org/10.1108/00483480310467642 |
| Author | Colin Hales,Orla Gough |
| Subject Matter | HR & organizational behaviour |
Employee evaluations of
company occupational
pensions
HR implications
Colin Hales and Orla Gough
Westminster Business School, University of Westminster, London, UK
Keywords Companies, Pensions, Reward, Loyalty, Commitment
Abstract 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.
Introduction
The potential long-term financial benefit to employees of belonging to final
salary occupational pension schemes, particularly where the scheme is non-
contributory or subsidised, is well recognised – so much so that the
Government Green Paper of December 1998 (DSS, 1998) described them as “one
of the great welfare success stories of this century”. Certainly, membership of
such schemes has offered considerable financial advantages over reliance on
the basic state pension which, as a result of indexation to prices rather than
average earnings, has continued to decline in value. Since 1988, it has become
possible for employees to choose to exclude themselves from their employer’s
pension scheme and to opt for a personal pension plan based on regular defined
contributions to an invested accumulating fund from a life annuity which
would be purchased on retirement. For a time, company occupational schemes
were considered somewhat unfashionable and restrictive and, by 1995, there
were 5.5 million personal pensions, compared with 10.7 million members of
occupational schemes (Blake, 1995). Now, however, with revelations about mis-
selling and the recent poor performance of personal pensions mirroring the
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/researchregister http://www.emeraldinsight.com/0048-3486.htm
Company
occupational
pensions
319
Received July 2002
Accepted October 2002
Personnel Review
Vol. 32 No. 3, 2003
pp. 319-340
qMCB UP Limited
0048-3486
DOI 10.1108/00483480310467642
decline in the stock market, the value of an occupational pension scheme has
been re-discovered. This corresponds, however, with a growing shortfall in the
size of some occupational pension funds and a re-evaluation on the part of
employers of the balance of the costs that they incur and benefits they derive
from offering an occupational pension, particularly when that is non-
contributory and based on defined benefits rather than defined contributions.
No company has set up a defined benefit scheme since the early 1990s and an
increasing number of companies are closing defined benefit schemes to new
employees in favour of defined contribution schemes, where terminal pensions
are more uncertain and unrelated to final salary (The Economist, 2002).
As a result of these developments, the present role of pension provision, as
part of a wider reward package, in human resource management is less than
clear. The apparent belief on the part of employers and commentators that the
provision of a company occupational pension was, if not a sign of benevolent
employer paternalism, then an effective device for attracting, retaining and
fostering the loyalty and commitment of employees (Taylor and Earnshaw,
1995; Terry and White, 1997) is being questioned seriously, both for its veracity
and for its continuing relevance. It is no longer clear, if indeed it ever was,
whether pensions attract or retain employees, foster employee loyalty and, if so,
loyalty to what, or whether employee loyalty is especially desirable from an
employer point of view, given the present focus on “flexibility”.
What has been missing from any consideration of the part played by
pension schemes in the management of human resources is evidence on
employees’ perceptions and evaluations of these schemes. Yet a sharper picture
of what employees do and do not find attractive about occupational pension
schemes would not only give a clearer indication of the likely effects of such
schemes on employee behaviour (and the effect on behaviour of their
withdrawal) but also enable employers to develop schemes that are more
accurately targeted at employee preferences. This paper attempts to shed some
light on these issues by reporting the findings of a recent survey conducted by
the authors of employee perceptions of the benefits and disadvantages of
different aspects of pension schemes and the process through which they came
to join a scheme.
The paper is structured as follows. It begins by sketching the background to
the study by outlining the development of occupational pension schemes and
discussing the characteristics of the two basic types – defined benefit (DB) and
defined contribution (DC). It then reports the findings of a two-stage research
study – an initial qualitative study followed by a survey of 684 employees
across 68 organisations – that investigated the relative attractiveness to
employees of different features of occupational pension schemes, the process
whereby employees joined a scheme and any current concerns that they had
with their pension provision. From an analysis of the findings it is argued that
the attraction of an occupational pension scheme for employees is less one of
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