amarach research and ucd geary institute pensions research march 2012

Attitudes to Opt Out Pensions

A Report by

and

March 2012

2

A. Background & Objectives

B. Omnibus Methodology

C. Profile of Sample

MAIN FINDINGS:

SECTION 1: Current Pensions

SECTION 2: Plans for Retirement

SECTION 3: New Pension Scheme

SECTION 4: Long-Term Orientation

SECTION 5: Snyder Hope Scale

KEY RESEARCH FINDINGS

Table of Contents

3

The UCD Geary Institute conducts research on life course issues

and the way in which public policy affects life outcomes and

development. Central to this is a unified methodology and

cross-disciplinary perspective which allows it to create effective

solutions to economic, political, epidemiological and social

questions in Ireland.

In 2014 a new pension scheme will come into effect, whereby

individual’s without a pension will enroll in a new government

scheme paying 4% of their income to the fund annually. This will

be met by a further 2% by the individual’s employer and the

government.

The main objective of this research is as follows:

A. Background & Objectives

To gain an understanding of Irish people’s attitudes towards the

new pension scheme, looking at present pension behaviour as well

as anticipated behaviour in light of this scheme.

4

• A series of questions were placed on Amárach Research’s

omnibus to investigate attitudes towards the new pension

scheme amongst the Irish populous.

• The omnibus is a syndicated service whereby clients can include

questions within the survey.

• A nationally representative online sample of 1,000 adults aged 16

years or older was used. Quotas were applied across gender,

age, social class and region to ensure the sample is fully

representative. A sample of 1,000 provides a sufficient base to

be able to conduct statistically robust sub-group analysis across

age ranges, social class and region.

• Interviewing is conducted on a monthly basis.

• The fieldwork in this research was conducted in October 2011

B. Omnibus Methodology

5

C. Profile of Sample

1728

4822

52

19

2816

1826

49

27

51

(Base: All Adults aged 18+ - 1005)

Female

% % % %

Male

15-24

35-44

45-54

55+

Dublin

Rest of Leinster

Munster

Conn/ Ulster

ABC1/ F50+

C2DE/ F50-

Gender Region

A nationally representative sample of Irish adults was utilised for this

research based on CSO figures.

Social

Class Age

25-34

MAIN FINDINGS

Section 1: Current Pensions

8

Employer’s Pension Scheme

27%

73%

%

Yes

(Base: All adults aged 18+ – 1,005)

Are you a member of an

employer’s pension

scheme?

No

Around 1 in 4 people are members of an employer’s pension scheme, with the majority

being male over the age of 35. Membership is significantly lower outside of Leinster

and, not surprisingly, membership is higher amongst the ABC1F50+ class. (Q.1)

Gender

Male

Female

Age

15-24

25-34

35-44

45-54

55+

Region

Dublin

Rest of Leinster

Munster

Connaught/Ulster

%

All with Employer’s Pension

Scheme - 269

32

22

9

22

34

34

33

29

30

25

21

9

Your Pension

18%

18%

50%

14%

%

(Base: All adults with a pension – 385)

Pension

type

(Q.2)

Don’t Know

Don’t have a

private pension

Defined contribution

or money purchase

Defined benefit

14% of individuals surveyed did not

know what type of pension they had,

highlighting the current lack of

knowledge surrounding pension

schemes and plans. Considering the

recent fluctuations in the economy

greater clarity will be needed on

pensions as an OECD report found

that Irish pensions lost 40% of their

value last year.

10

5

323

60

17

6

Pension Contribution Rate

%

(Base: All adults who contribute to their pensions– 426)

58% of respondents either made no contribution to their pensions or were

uncertain as to the amount.

(Q.3)

17

8

26

20

29

0-10%

10-20%

20-30%

30-40% 40-50% 50-60%

Percentage Contribution

(N = 258) Monetary Contribution

(N = 168)

Less than €100

€100-€500

€500-€1,000

€1,000-€5,000

€5,000+ 60-70%

%

Section 2: Plans for

Retirement

12

Estimated Retirement Age


(Q.4)

23

8

23

36

64

5

0

10

20

30

40

Before

50

50-54 55-59 60-64 65-69 70-74 75+ No

intention

51% of respondents do not plan

on retiring until after the age of

65 which is significantly higher

than the current employment

rate for that age group in

Ireland (33%) (Source: CSO.ie, Quarterly National Household

Survey)

13

Adequate Income Sources for Retirement

35%

22%43%

% Yes –

Adequate

Resources


TOTAL

No –

Inadequate

Resources

Over half (52%) of 35-44 year olds feel that they will not have adequate resources for their

retirement, even though their pension contributions are similar to other age groups.

(Q.5)

Gender

Male

Female

Age

15-24

25-34

35-44

45-54

55+

Region

Dublin

Rest of Leinster

Munster

Connaught/Ulster

%

Inadequate Resources for

Retirement

Not Sure

45

41

26

41

52

49

44

38

46

46

40

14

Estimated Adequate Income During Retirement


The younger generation expects to need much less income per week when they retire which

either represents a lack of appreciation of costs and expenditures in retirement or an

adjustment to lower incomes experienced during the recession. (Q.6)

6

35

28

15

64

23

0

10

20

30

40

200 or

less

300-400 400-500 500-600 600-700 700-800 800-900 1,000+

27% of respondents aged over

25 thought that more than €500

was an adequate living amount

per week, whereas only 40% of

15-24 year olds estimated that

this was necessary.

Euro amount per week

necessary during retirement

Section 3: New Pension

Scheme

16

Opt In/Opt Out of New Scheme

30%

18%

35%

17%

%

(Base: All adults with a pension – 385)

New Pension Scheme

Participation

Only 17% of respondents said they would opt in to the new scheme. Female’s and those from

Connaught/Ulster were least likely to opt in as they weren’t sure. Information regarding the

scheme will needed to be targeted at these cohorts so they can make an informed decision. (Q.7)

Gender

Male

Female

Age

15-24

25-34

35-44

45-54

55+

Region

Dublin

Rest of Leinster

Munster

Connaught/Ulster

%

OPTING IN

Don’t Come

Under it’s Effect

Don’t

Know

Opt

Out

Opt

In

22

13

18

23

17

14

14

18

16

21

12

17

Attitudes Towards Proposed Plan

%

(Q.8)

%


I Don’t Come Under It’s Effect

I Will Not Opt Out As It Seems Like A Good Deal

I Don’t Understand It

I Already Have a Pension

I Will Opt Out As I Don’t Trust The Government

I Will Already Be Retired

I Will Opt Out As I Can’t Afford The Money

I Will Not Opt Out But Change My Contribution Rate

I Will Opt Out As I Don’t Trust My Employer

30

14

11

9

6

5

5

4

2

18

47% of respondents felt that 4% was

an appropriate amount, combined

with the further 4% provided between

the employer and the government the

contribution is 8%. This is similar to

the amount 60% of respondents with

employer pension schemes currently

contribute.

Attitudes Towards 4% Rate

15%

47%

12%

26%

%

1 in 4 felt the contribution rate was either too high or too low and so the provision for

alternative contribution rates may have to be established to attract the majority of individuals.

(Q.9)


Too

High

Don’t

Know

Too

Low

Approximately

Correct Government Employer

Individual

Section 4: Long-term

Orientation

20

Geert Hofstede’s cultural dimension’s theory is one which helps to explain

differences between individuals from different cultures across six value

dimensions:

– Power distance

– Individualism

– Uncertainty avoidance

– Masculinity

– Long term orientation

– Indulgence

Long-term orientation describes societies’ time horizon. Long term orientated

individuals attach more importance to the future, including pragmatic values

orientated towards distant goals and rewards. This way of thinking is usually

associated with Eastern countries, i.e. China, Hong Kong, and Japan.

Short term orientated individuals are more concerned with the past and the present,

placing importance on steadiness, respect for tradition, reciprocation and fulfilling

social obligations. This way of thinking is usually associated with Western

countries, i.e. America, Europe, etc.

People who are long-term orientated are likely to be more actively involved in

preparation for the future which includes maintenance and growth of their

pensions. This analysis allows us to see how much importance people place on

future preparations across multiple demographics.

Long-term Orientation (Hofstede) -I

21

The LTO index is based on three questions: If there is something expensive you really want to buy but you do not have enough money, what do you do?

– I always save before buying – I usually save first – I sometimes save, sometimes borrow to buy – I usually borrow and pay off later – I always buy now and pay off later

Are you the same person at work (or at school if you’re a student) and at home?

– Quite the same – Mostly the same – Mostly different – Quite different – Don’t know

To what extent do you agree or disagree with each of the following statements?

– Disagree Strongly (1) – Agree Strongly (5)

Persistent efforts are the surest way to results We should honour our heroes from the past The LTO index normally has a range of about 100, e.g. China (118), Hong Kong (96) versus United States (29) and the UK (25).

Long-term Orientation (Hofstede) - II

(Source: Hofstede, 2002. Human relations)

22

Long-Term Orientation - I

30%

36%22%

9%3%

If there is something expensive you

really want to buy, what do you do?

66% of respondents claim to save before purchasing although considering the current

economic climate this may be difficult to maintain. 78% of respondents act the same at home

as they do at work although this claim may be due to a self-image bias rather than objectivity.

(Q.1)

25%

53%

9%

8%5%

Are you the same person at work as

you are at home?


% %

I Usually

Save

First

I Always Save

Before Buying

I Usually Borrow and

Pay Off Later

Sometimes

Save,

Sometimes

Borrow

Mostly

The

Same

I Always Buy Now

and Pay Off Later

Don’t

Know Quite

The

Same

Mostly

Different

Quite

Different

23

28

26

31

12

2 3

43

32

19

4

Long-Term Orientation - II

Persistent efforts

are the surest way

to results

Older cohorts agree more strongly with both statements and ABC1F50+ respondents are

more likely to agree with the statement that ‘persistent efforts are the surest way to results’. (Q.12a/b)

We should honour

our heroes from

the past


5 – Agree Strongly

4

3

2 1 – Disagree

Strongly

5 – Agree Strongly

4

3

2

1 – Disagree Strongly

24

64

55

41

63

67

63

59

Long-Term Orientation Scores

Respondents aged 15-24 (School/College years) place little importance on the future but it

becomes much more of a priority by 25. This effect weakens with age as the future and the

present begin to juxtapose.

Gender

Male

Female

Age

15-24

25-34

35-44

45-54

55+

Region

Dublin

Rest of Leinster

Munster

Connaught/Ulster

Social Class

ABC1

C2DE


%

59

64

57

55

54

64

Section 5: Snyder Hope

Scale

26

The Adult Trait Hope Scale was developed by a research team led by Charles Snyder in the late 80’s. They suggested that there are two major, interrelated elements of hope: Pathways thinking – the capacity to find routes to desired goals. Agency thinking – finding the motivation to actively pursue those routes.

Further research by Bailey and Snyder (2007) found that individuals between the ages of 55 and 64 were least hopeful. This was put down to poor ‘Pathways thinking’ scores which indicates that older cohorts are less capable of determining how they would achieve their goals, perhaps in light of their on-coming retirement. This research also found that separated/widowed/divorced cohorts were less hopeful than their married or single counter-parts. No differences were observed on the individual aspects of the scale so the researchers suggested that a loss of hope may occur as these individual’s have to achieve their goals by themselves.

Trait Hope Scale (Snyder) - I

27

The scale itself is made up of 12 questions: Four ‘Agency

Thinking’ questions, four ‘Pathways Thinking’ questions and four

fillers.

Participants answer on a 8 point likert scale from ‘Definitely

false’ (1) to ‘Definitely True’ (8).

Trait Hope Scale (Snyder) - II

I energetically pursue my goals

My past experiences have prepared me well for my future

I’ve been pretty successful in my life

I meet the goals that I set for myself

I can think of many ways to get out of a jam

I can think of many ways to et the important things in life

There are lots of ways around any problem

Even when others get discouraged, I know I can find a solution

Agency Thinking

Pathways Thinking

28

Trait Hope Scores

Participants scored similarly on both the ‘Agency Thinking’ and ‘Pathway Thinking’

segments of the Trait Hope Scale across all demographics. Scores of 45-50 indicate

that our sample is relatively hopeful, and is similar to Bailey and Snyder’s (2007)

American sample. (Q.10,11,12)

22

22

22

21

21

22

24

23

22

22

22

22

23

24

45

44

44

43

43

44

48

23

22

22

22

23

22

23

22

22

22

23

22

46

44

45

44

46

44

Gender

Male

Female

Age

15-24

25-34

35-44

45-54

55+

Region

Dublin

Rest of Leinster

Munster

Connaught/Ulster

Social Class

ABC1

C2DE

(Base: All adults aged 18+ – 1,005) Agency Thinking

Pathway Thinking

Hope Score

29

The results from the Trait Hope Scale are surprising in that the mean scores for the segmented cohorts ranged between 42.69 and 47.69, suggesting the respondents were quite hopeful. Previous results from Bailey and Snyder (2007) indicate that older cohorts usually experience lower hope, although the opposite has been found here with respondents aged 55+ scoring slightly higher than others. Two theories could explain this finding: – The older respondents in Ireland are more hopeful than in

Bailey and Snyder’s (2007) sample, or – The younger sample are less hopeful

Given the current economic climate, in particular the employment market, we could suggest that younger people feel that there is little available to them in Ireland, a theory which is supported by the predicted emigration figures of 50,000 by The Economic and Social Research Institute.

Interpretation of Trait Hope Scale Scores

Key Research Findings

31

Only 1 in 4 respondents were part of an employer’s pension scheme. 6 in 10 respondents with a pension contribute between 1 and 10%. Over half of respondents do not plan on retiring until after the age of 65. 43% of respondents do feel that they will have inadequate resources in their retirement. Younger cohorts expect to need less resources to live comfortably during their retirement. Only 17% of respondents said they would opt in to such a scheme although 30% were uncertain. Almost half (47%) of respondents said 4% is the correct contribution rate for the new pension scheme. Men were more long-term orientated than women and those aged 15-24 were the least so. LTO scores did not differ by region but C2DE respondents were more long-term orientated than their ABC1 counterparts. Hope scores did not vary across gender, age, region or social class.

Key Research Highlights - I

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