Abstract: Abolishing Retirement? The "Employer Covenant" and the Privatization of Pensions Liabilities in Major British Companies, c. 1980-2010
In recent years pension provision has come under great stress in many countries, although detailed institutional arrangements vary greatly. An important aspect of Britain's "pension crisis" has been the deterioration in the funding positions of many occupational pension schemes (OPS) sponsored by major listed companies. The wider difficulties of private sector OPS have brought onto the political agenda the relative generosity and underfunding of public sector pensions, a debate that has largely ignored the impact of Britain's 1980s and 1990s privatization program in shifting considerable pension liabilities from the public to the private sector. The provision of OPS in private and public sectors grew dramatically in the decades after World War Two, but the "employer covenant"—the ability and willingness of employers to provide and support OPS—has weakened in the last twenty years. The benefits to employers of providing such schemes have diminished, reflecting changes in employment patterns and the bargaining power of labor. The costs of providing OPS have increased, with changes in regulation, investment returns and demographic factors. But I also argue that the apparent affordablity of OPS in earlier decades was to some extent illusory, and that privatization has played a part in exposing this.