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Dissertation On Occupational pension Sample



Occupational pension schemes in the public and private sectors in the United Kingdom has experienced steady divergence in prevalence and value over the years and has become a topic of considerable importance. Differences in the value of pension provision could magnify or reduce the set divergence in current pay values between both sectors and this has been an area of significant interest in recent years because of the well-documented decline in the number of defined-benefit pension schemes available in the private sector and particularly those, which are still open for the new participants. It is quite well known that in the UK, the defined benefit pension scheme i.e. DB is widespread more in public sector compared to the private sector as a lot of existing works have been done on this particular area by pension actuaries and experts.Therefore, this project research focus is to examine and highlight the differences between defined benefits and defined contribution in the pension schemes of UK and will also specifically follow the gradual shift from DB to DC in the pension schemes of UK’s public and private sectors.

Structure of the Research

The structure of the project research is as follows:

Introduction - This chapter provides an overview of occupational pension value in the public and private sectors and also gives introduction in regards with the main purpose, focus, framework and analysis.

Literature Review – This chapter of the dissertation offers a theoretical background for the study. It involves the work done by authors and scholars in relation with the topic of the research. In this project research study also, the literature review section provides information about different types of occupational pension schemes being available to the workers in the public sectors.

Research Methodology – This section is considered as one of the crucial and vital part of the whole report, as it offers various methodologies to be used in the research. It entailsstrategies in regards with collection of data, their analysis, sampling techniques, research approach and design etc.

Data Analysis & Findings – In this chapter, the data being accumulated in the previous chapter are evaluated and analyzed in order to make further interpretation. Most of the analysis to be done in this project research would be descriptive as I look to examine and build more on existing theories and also the use of themes in the analysis of responses collated from study questionnaire.

Conclusions & Recommendations –Here, the objectives of the research are matched with the final findings and recommendations are also being suggested for further improvements.

Focus and Purpose of Research

This project research would focus on examining the differences in remuneration values, pension rights accruals, accessibility and shifts in pension scheme participation in occupational pension within the public and private sectors.
Aim – The main aim of this study is to examine and highlight on the shift from defined benefits (DB) to defined contribution (DC) in the pension schemes of UK’s public and private sectors.


When speaking in regard of the average value of annual remuneration received in the form of pension annually, it can differ between the public and private sectors due to three main reasons; First, the proportion of varying employees who are members of occupational defined-benefit or a defined-contribution  pension plan in each sector. Second, the difference in the average value of a year’s pensions rights amongst participants of defined-benefits schemes arising from distinct rules between sectors. Third, the differences in the level of contributions made to defined- contribution schemes thus resulting in a difference in the average value of a year’s pension rights for participants of the defined-contribution scheme in the public and private pension sectors. Thus, if these factors- pension participation and the value of schemes to their members-alter differently in the private and public sectors over time, dissimilarity between the values of pension remuneration in each sector may have widened or narrowed (Cannon and Tonks, 2008). Hence, the main purpose of the research is to examine and analyze using descriptive analysis the differences between the occupational pension values in both sectors.

Research Questions

Which types of occupational pension schemes are available to workers in UK’s public sector?
What are the pension provisions in UK private sector?
What type of differences exists in the value of pension schemes in public and private sector of UK?
Whether pension schemes adopted by the public sector are accessible to workers with lower pay?

Framework and Analysis

The framework and analysis part helps in providing details in relation with the various ways in which the whole research will be carried out. In this current research study, the following techniques are being employed:

Research Design – Exploratory research design.
Research Approach – Inductive research approach, as there is no hypothesis testing in the study.
Data collection method – Both primary and secondary method of data collection.
Data Analysis Technique – Qualitative data analysis technique by making use of descriptive analysis.

Literature Review


Due to the presence of numerous reforms in this sector, the pension system of UK has become quite complex. The current picture of the UK pension system can be depicted by three tiers. The first tier is being considered as mandatory, which entails flat rate and are publicly funded on the basis of “Pay as you go”. Here, in this tier, there is also a growing and significant amount of means tested benefits available in regards with the lower income pensioners. Speaking in relation with the second tier, it is quite essential for the employees, although individuals face large degree of choice over the type of pension that they can accumulate. On the other hand, the third tier entirely entails voluntarily private savings, which are operated on funded basis (Bader and Gold, 2003). More description in regards with the pension system of UK’s public and private sector will help in determining the difference in occupational pension value. Therefore, this present chapter will encompass an outline of earlier research work being done in the domain of pension and its system in UK’s public and private sector.

The UK Pension System

With the rising and important reforms being undergone from the last two decades, the pension system of UK is becoming particularly more interesting and noticeable in the eyes of public.  Furthermore, in relation with the income of current generation of pensioners, it comprises state support along with slightly smaller but however significant amount from the private sources (Dutta et al, 2000). In contrast to this, in many European Union nations such as France, Italy, Germany, larger amount of pensioner’s income comes from the state. In addition to this, it has been forecasted that the number of pensioner’s will grow by around 40 per cent in the coming 50 years; on the other hand, the working population is expected to remain constant over the years. Thus, by taking into consideration financial means of the current public pension system i.e. “pay-as-you-go basis”, this ageing population will surely lead to a severefinance problems in the future. The reform being introduced since 1980 in UK have left the state system sustainable in terms of future costs. These have taken the form of reductions in the future generosity of the state system (Pierson and Weaver, 1993). This was a result of the formal price indexation of the flat rate of pension, decrease in the level of earnings related component of the public pension system and finally, increase in the state pension age for women.

Types of Occupational Pension Plans

Pension schemes are traditionally distinguished according to whether they are, in British terminology, ‘salary-related’ or ‘money purchase’. International terminology describes such schemes as, defined benefit (DB) and defined contribution (DC) plans respectively. In ‘salary-related’ or DB plans, a specified level of pension benefits is promised to the participant, based on the individual’s years of service and some measure of earnings. Although it is not a dire requirement of a salary-related plan, the earnings measure used in calculating pension benefits in DB plans is usually in practice some form of (smoothed) final earnings. Since such plans tend to favor individuals with longer plan tenures and therefore higher final earnings, it is an intrinsic feature of DB plans that there isredistribution of plan benefits, relative to contributions, from early leavers to those with uninterrupted pensionable jobs to retirement; this is sometimes termed ‘back loading’ of benefits.

The current pension landscape in the private sector of UK

All the pension benefits that are non-state are included in the Private sector pension provision. Defined benefit, Defined contribution or Hybrid schemes are the various forms in which these pensions are provided. In the Defined Benefit (DB) pension scheme, there is a link between the pension benefits and either the final salary or the average salary of the scheme member and their length of service.

In Defined Contribution (DC) pension schemes, the members and/or the employer contribute to build pension fund. The Government offers tax reliefs on the contribution of the members and hence motives them to contribute. The final pension depends on the returns on the assets invested in and the conversion of the pension into retirement scheme. In case of an annuity, the member’s final retirement income will depend on the then prevailing annuity rate. Private sector pension schemes having both DB and DC features are called Hybrid schemes (Budd and Campbell, 1998).

The differences in structure between public and private sector schemes

Speaking in regards with the public sector schemes, they are being defined as those pension schemes, which are being run by the government for the purpose of providing benefit to the government employees of the nation (Matsen and Thogersen, 2004). In the public sector, there are total of seven pension schemes, which all have total membership of about 5 Million people with different structuresas well. These include the NHS, fire fighters, local government, civil service, police, teachers and armed forces. All these schemes are directly run and paid by the government departments. On the other hand, the locally run or branded schemes are such, in which the regulations are being formulated centrally, though the scheme is separate and being run by the local authority. Other than these big schemes of the public sector, there are a number of smaller schemes such as the Judiciary, Research Councils, for MP’s and the UK Atomic Energy Authority, which have total active membership of around thirty one thousand people. There are three main differences that exist between the structure of public and private sector schemes:

Other than the local government schemes, public sector schemes are un-funded. This is a mechanism in which participants contribute into a common pool (with employees paying a specific amount and the rest funded by the employer) and pensions are paid out as at when due. The distinctive factor of this mechanism is that the pool isn’t invested as funds are merely recycled. While, most approved private sector and local government schemes are funded (Perssonet.al. 2000).

Public sector schemes are formed, reformed and statutory through Acts of Parliament. The armed forces pension scheme can be modified and improved only by the primary legislation. On the other hand, various other schemes can be amended by secondary legislation, which is quite speedier in comparison to primary legislation and involves onerous procedure. Throwing light on the private pension scheme, it can be modified and amended by trustees. Further, it can be closed by the sponsoring company as well.

Research Methodology


Research is a systematic process being undertaken by the researcher and is intended to determine the relationships and outcomes in an organized manner. It helps the enhancing the horizon of knowledge as well as level of understanding. In addition to this, it offers a proper outline so that it becomes uncomplicated for the researcher to complete the research work. This is being considered as one of the most important part of the research, as it entails different research methods being employed to carry out the work effectively(Glenn and Gordon). Furthermore, with a view to ensure superior quality and logical flow of information, focus of the researcher should be made on suitability, authenticity and applicability of the approaches. Seeking help from the different methodologies, the major aim and objectives of the study get fulfilled (Hannabuss, pp.523 – 524). Thus, it is imperative on my part to be well versed with all necessary tools and techniques in order to make sure the study a big success. Here, in this present case, this chapter will provide a detail overview of assortment of techniques and approaches being employed in the study.

Research Aims & Objectives

Aim – The main aim of this study is to determine the shift from defined benefits (DB) to defined contribution (DC) in the pension schemes of UK’s public and private sectors.
Objectives –
To identify different types of occupational pension schemes available to workers in UK’s public sector.
To understand the structural differences between UK public and private sector pension schemes
To examine the disparities in occupational pension values of schemes in the public and private sector
To examine the accessibility of available pension schemes for workers with low salary.

Research Philosophy and Approach

The research philosophy part of this research provides deep insights into the various research methods relating with the data collection, their use and analysis. Further, it also helps in facilitating proper investigation pattern, which allows effective espousal of the research process. There are mainly two types of research philosophy i.e. positivism and interpretivism. Speaking in regards with the positivism philosophy, it is relatively conventional opinion and is of the belief that all theories can be proved. It further depends heavily on testing of hypothesis. On the other hand, interpretivism philosophy asserts that generalized premises as well as rules cannot be deducted by thorough understanding of intricate environment (Neuman). Perceptions as well behavior are formed based on the interpretation of things. Here in this research report, interpretivism philosophy is being used because the nature of the research is qualitative as well as the data collated.

Research design

Research design helps in mitigating the chances of wrong interpretation of information and thus, plays a crucial role in the research. Further, it helps in summing up all the elements of the research process such as sampling, data accumulation, evaluation etc. There are four main types of research design i.e. exploratory, experimental, case study and descriptive.
In this research study however, exploratory design of research has been utilized.

Research Approach

In relation to exploratory study which is being carried out in this research project, it is majorly dependent on two approaches i.e. inductive and deductive. The former one is being regarded as the bottom up method as it entails accumulation of data followed with observation from a bird’s eye view and reviewing the prevalent trends. In other words, it can be said that inductive approach involves a movement from definite to general. In contrast to this, deductive approach is the top down approach. Herein, a hypothesis is being developed and it moves from general to specific aspects. In this case, inductive approach is being usedsince there is no hypothesis testing.

Data Collection

In order to collate relevant data, there are mainly two types of methods i.e. primary and secondary. Throwing light on the primary data collection sources, these require collation of first hand and fresh information. Such type of method is more critical and complex. On the other hand, secondary data can be easily accessed. For this research study, both primary and secondary data collection sources are being used by the researcher. Primary data is being collected by the use of questionnaires which have been sent to HR and Finance managers of private and public sectors companies.The private sector firms include Marks and Spencer and Aviva life insurance and public sectors include British Trade International and Department of Trade and Industry. On the other hand, secondary data is accumulated by exploring various journals, articles and books of renowned authors. Further, a review of British Household Panel Survey report, Department of Work and Pensions, Bloomberg, Government Actuaries Department and other useful sources is also done.

Data Analysis and Findings


This chapter of the dissertation is being regarded as one of the most important and crucial part, as it helps in examining the data being gathered from various primary and secondary means. In addition to this, data analysis section also discusses about the findings and results of the study in order to draw some valid conclusions.Furthermore, all the findings are consistent with the research questions, which have supported the whole research work to flow in a logical and right direction. Speaking in regards with the data analysis, it is nothing but primarily a process, which involves revision, transformation and remodeling of data with a view to facilitate final decisions regarding the concerned situation or research problem. There are majorly two methods through which analysis of data can take place and these are qualitative and quantitative analysis techniques as discussed above.

In this research study, qualitative techniques for analyzing data have been applied in order to evaluate the data accumulated by various sources. For this, descriptive analysis is being used. In this method, the data is being explained in thematic forms, which will enlighten the informative details in regards with the subject matter as allthis information is quite cumbersome to present through graphs. Therefore, it can be said that qualitative analysis by thematic or descriptive analysis method is being considered as one of the best combination in order to provide the final outcomes and results of the study.


In this case, both primary and secondary data has been collected. Primary data is being gathered by the use of questionnaires and data accumulated is analyzed thematically. As the organizations involved have a huge market in the UK and thus, employ quite a number of HR managers at various locations of the company, therefore, a total of 25 HR managers from companies operating in both the sectors have been selected.

Theme 1: The pension system of UK is quite complex

When the HR managers working in both public and private sector companies were asked their opinion regarding the pension system of the UK, most of them revealed that the system should be simplified as most workers do not necessarily understand the fundamentals and add-ons of a pension system and thereby do not plan their retirement accordingly. On the other hand, there are some managers who were of the belief that the current pension system of UK is quite simple and provides various benefits to employees.

Theme 2: The current pension landscape in the both sectors

When respondents were asked about the current pension landscape in the private sector, most were of the opinion that the landscape of pension system of privatesector is ever changing. On the other hand, some of the participants were of the belief that there is no alternation in the provision of pension in the private as well as public sector.

Theme 3: Structural differences between the pension schemes of public and private sector companies in UK

On asking the HR managers if any structural differences exists between the pension schemes of both sectors, majority were of the opinion that structural differences do exist as the mode of payment or remuneration between the two sectors is quite different.
Findings – Judging from the feedback of the participants, most of them believe that structural differences exists between the pension schemes of public and private sectors due to three main reasons; In public sector scheme the benefits relating with pension are paid out from the current income pool as and when they become duei.e. funds are pooled together from the contribution of both employers and employees and benefits are simply paid out of the pool when due. Also, public sector schemes are formed, reformed and statutory through Acts of Parliament. On the other hand, private pension scheme can be modified and amended by trustees.

Theme 4: Defined benefits and defined contributions are the major occupational pension schemes available in public and private sector

After assessing the accumulated responses of the participants, it was concluded that in private sector companies, the pension benefits generally stems from defined contribution. On the other hand, managers working in the public sectors revealed that majorityof the pension benefits stems fromdefined contribution.
Findings – The derived result from the research shows that quite a number of the HR managers working in the private sector companies revealed that in their company, the defined contribution is the major pension benefit being given to the employees. In this plan, the contribution of the employees is invested by the firm in some projects and the returns from those investments are credited in their respective accounts. However, the rest were of the opinion that their firm offers various other retirement plans. Speaking in regards with the pension benefit being granted by public sector companies, around 75% of the respondents were of the opinion that they grant defined benefit to their employees. In this plan, the retirement benefit is being calculated by employing certain formula and not by investment.

Theme 5: Changes in Regulation and Legislation is a major factor that has contributed in the decline of Defined Benefit pensions in the private sector in the UK

On asking the respondents which factor in their opinions has contributed most to the change from and probably decline of defined benefits pensions scheme, most were of the opinion that it is due to changes in regulations and legislations.
Findings – After evaluating the feedback of the participants, it was revealed that around 67% of respondents were of the belief that it is through changes in regulation and legislation, according to respondents, these changes not only increased the costs for DB schemes but also made the provision of DB pensions unattractive. Some of these alternations are changes in the security of pension benefits, in the protection measures of the rights of members, in EU regulations, tighter accounting standards and finally, revised standards for funding.


This project research has tried to examine and shed more light on various reasons pertaining to the differences between defined benefits and defined contribution in the pension schemes of UK and has also highlighted on the shift from DB to DC in the pension schemes of UK’s public and private sectors. Further, this research paper has commendably given an account of information in regards with the different types of occupational pension schemes available to workers and also shed light on various pension schemes being adopted by the private and public sector. Also, further examination has been done in the disparities in value of pension schemes in public and private sector and the causes of such disparities.

The current findings and study of the research confirms previous research studies and contributes additional evidence in the form of respondents’ feedbacks that the occupational pension value is greater in public sector companies having stated that private sector offer less pension value than the public sector firms. Furthermore, that combination of defined benefits and defined contributions schemes are lower in private sector companies as compared to the public sectors and as a result, the average value of pension accrual is higher in the public sector organizations.


Books and Journals

  • Andersen, Carsten.andSkjodt, Peter. Pension Institutions and Annuities in Denmark.The World Bank,2007.
  • Axinn, William and Pearce, Lisa.Mixed Method Data Collection Strategies.Cambridge University Press.Cambridge University Press, 2006.
  • Bader, Lawrence and Gold, Jeremy.“Reinventing Pension Actuarial Science”.Pension Forum. 14.2 (2000): 1-13.
  • Banks, James and Emmerson, Carl. “Public and private pension spending: principles, practice and the need for reform”. Fiscal Studies. 21 (2000): 1–64.
  • Bell, David and et.al. “The pattern and evolution of geographical wage differentials in the public and private sectors in Great Britain”. Manchester School. 75 (2007): 386–421.
  • Blackaby, David., Murphy, Philip and O’Leary, Nigel. “The payment of public sector workers in the UK: Reconciliation with North American findings”. Economics Letters. 65 (1999): 239-243.
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