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School of Social Sciences

Connecting policy to the personal: UK pension reforms and individual decision making

Older people's feet walking

Postgraduate research student, Hayley James, is researching how we make decisions about what to pay into our pensions. She has found that there are a number of social and cultural factors at work.

My research is about how people make decisions regarding their pension. Until 2012, participation in private pensions in the UK was falling, which means many people were at risk of not having an adequate income in later life. In 2012, the UK introduced automatic enrolment into workplace pensions, which is a national voluntary UK scheme where employees are automatically enrolled into workplace pension schemes, with employer contributions and tax benefits. This policy was introduced to encourage people to save in the private pension system in order to achieve an adequate income for their retirement.

“It’s been successful, as the number of people participating has increased, but there remain concerns about the amount of contributions being made by enrolled employees. Data so far shows that people tend to stick to the minimum contribution levels, which are unlikely to guarantee an adequate income in retirement. This means that to ensure an adequate income, individuals are expected to engage actively with private pension saving once they have been automatically enrolled, particularly by increasing their contributions over time. This suggests there is a need to understand better how and why individuals make decisions about their pension – and this is what my research aims at doing. 

Hayley James
Hayley James

My research is also based on qualitative research through interviews with employees who have gone through auto-enrolment to consider the following research questions:

  • What are the multiple forms of rationality that individuals apply when making a decision about their pension following auto-enrolment?
  • What social and cultural factors are relevant to understanding individual pension decision making?
  • How do perceptions of pension risk shape individual pension decision making?

“A lot of what I’ve been doing so far concerns the idea of the future possible self. Possible selves are an idea drawn from psychology which shows how our sense of self is used to make meaning and organise our experience, thoughts, feelings and actions, and how the self is adaptive over time.

“Possible selves are related to this adaptive conception of the self, as they are future-orientated representations that guide behaviour. We talk about ‘hoped-for selves’ which are positive representations, and ‘feared-for selves’, which are negative representations. It is suggested that future possible selves help us to evaluate current behaviour, and also motivate us to take action in order to move towards hoped-for and away from feared selves – so one of the things I am looking at is whether or not the engagement with future possible selves is something that shapes pension decisions. 

The biggest identifiable trend so far is how little people seem to think about their future, and even where they do, there is a serious disconnect between this and their pension decision-making. The amount they pay in is much more dictated by short-term needs, such as what they can afford, and social or cultural factors, such as what other people around them pay. In some ways, auto-enrolment exacerbates this, because it means people have to think even less about their future.

"Data so far shows that people tend to stick to the minimum contribution levels, which are unlikely to guarantee an adequate income in retirement."

Hayley James / postgraduate research student

I have always been interested in money and how we make decisions involving money. In part this comes from my background, since I worked for years as a management consultant, and I became very frustrated with the focus on money as the only measure of value in business. There are many other ways of thinking and measuring value. Money is a subjective tool, we just tend to believe it is objective. I wanted to research the subjectivity of money, and how we use it to represent our personal meaning of the world. This wasn’t specifically about pensions but now I’ve learnt more, I think it’s a very interesting area of interaction between financial/economic and social/cultural interests.”

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