The Thatcher pension reforms and their consequences
Lead Research Organisation:
University of Bristol
Department Name: School of Humanities
Abstract
Since the end of 2006 there has been a widespread consensus that Britain's pension system is seriously dysfunctional. The debate over the nature and extent of the 'pensions crisis,' and over ways in which it might best be remedied, has been extensive and given rise to a number of policy responses. Yet surprisingly little attention has been given to the historical roots of that crisis, or to the ways in which the historical development of Britain's complex system of public and private provision for security in old age both helped to create the crisis and constrained options for change. The reforms implemented in the 1980s marked a key moment in the development of Britain's overall system of income replacement in old age. Yet we lack any detailed historical survey of developments in that decade, and their legacy, utilising primary sources from the period. Without fully understanding the roots of the pension problem how can we solve it effectively? Lacking such an understanding we are in danger of repeating mistakes made in the past: in particular:
i) a persistent over-estimation of a) the ability and willingness of the private sector to provide decent pensions for the lower-paid; and b) the ability and willingness of consumers to finance and prioritise the necessary long-term saving over short- to medium-term consumption;
ii) a persistent under-estimation of the power of vested interests to obstruct and/or channel policy change, an under-estimation owing much to a failure adequately to understand either the nature of the vested interests which must be accommodated by policy makers or the power resources deployed them in the policy process;
iii) a failure fully to grasp the constraints placed on policy change by very long-term individual and collective contracts (both financial and political) in pensions;
iv) a continuing lack of understanding amongst both academics and policy practitioners of the political and economic cost-benefit calculations that underpin policy making in an area with perhaps the longest time-horizons of any field of policy;
v) a persistent tendency to achieve 'reform' by adding new elements to the system, thus making the system more and more complex over time.
The project proposed here will fill a significant void in our understanding. It will take advantage of the accelerated release of official and other records consequent on the government's decision to move to a '20-year rule' for document release in order to examine in detail the policy changes of the 1980s. In doing so, it will both build on and extend existing studies of postwar pensions in Britain (by, for example, Bridgen; Pemberton; Thane; Whiteside; and Thornton) and address important debates in political science about institutional development in terms of:
a) the effect on institutional development of positive feedback effects ('path dependence') that help to 'lock-in' particular institutional configurations
b) the ability of incremental change cumulatively to produce radical change
c) the impact of negative feedback in the system and its implications for both the development of the overall system and the development of government policy, and
d) issues of 'governance' and the role of non-governmental actors in the policy process.
As such, it will provide a link between contemporary historical research, political science theory, and present policy debates about the future of British pensions in the twenty-first century.
In the process, the project will:
1) Connect to the AHRC's 'care for the future' theme by linking history with present policy to address the country's 'pensions crisis' and thus, by extension, with the future welfare of pensioners.
2) Contribute to the AHRC's 'pathways to impact', aiding better policy making by enhancing our understanding of the development of Britain's system of pension provision (at once one of the most complex in the world and one of the least effective in the OECD).
i) a persistent over-estimation of a) the ability and willingness of the private sector to provide decent pensions for the lower-paid; and b) the ability and willingness of consumers to finance and prioritise the necessary long-term saving over short- to medium-term consumption;
ii) a persistent under-estimation of the power of vested interests to obstruct and/or channel policy change, an under-estimation owing much to a failure adequately to understand either the nature of the vested interests which must be accommodated by policy makers or the power resources deployed them in the policy process;
iii) a failure fully to grasp the constraints placed on policy change by very long-term individual and collective contracts (both financial and political) in pensions;
iv) a continuing lack of understanding amongst both academics and policy practitioners of the political and economic cost-benefit calculations that underpin policy making in an area with perhaps the longest time-horizons of any field of policy;
v) a persistent tendency to achieve 'reform' by adding new elements to the system, thus making the system more and more complex over time.
The project proposed here will fill a significant void in our understanding. It will take advantage of the accelerated release of official and other records consequent on the government's decision to move to a '20-year rule' for document release in order to examine in detail the policy changes of the 1980s. In doing so, it will both build on and extend existing studies of postwar pensions in Britain (by, for example, Bridgen; Pemberton; Thane; Whiteside; and Thornton) and address important debates in political science about institutional development in terms of:
a) the effect on institutional development of positive feedback effects ('path dependence') that help to 'lock-in' particular institutional configurations
b) the ability of incremental change cumulatively to produce radical change
c) the impact of negative feedback in the system and its implications for both the development of the overall system and the development of government policy, and
d) issues of 'governance' and the role of non-governmental actors in the policy process.
As such, it will provide a link between contemporary historical research, political science theory, and present policy debates about the future of British pensions in the twenty-first century.
In the process, the project will:
1) Connect to the AHRC's 'care for the future' theme by linking history with present policy to address the country's 'pensions crisis' and thus, by extension, with the future welfare of pensioners.
2) Contribute to the AHRC's 'pathways to impact', aiding better policy making by enhancing our understanding of the development of Britain's system of pension provision (at once one of the most complex in the world and one of the least effective in the OECD).
Planned Impact
Though the proposed project is a work of history it engages both with policy today and with the work of social scientists (who, if journalists are taken to produce 'the first draft of history', have come to be the writers of the second draft that contemporary historians must then assess and, as is often necessary, correct). Its principle justification is that an understanding of the reforms to the system in the 1980s , firmly rooted in a deep empirical analysis of all available sources, and of their later impact is essential if we are to understand and solve the present crisis in British pensions.
The project will utilise a number of tools for wider engagement used already in different contexts to engage with policy actors.
1. Interviews will be conducted with politicians, advisers, civil servants, business (both firms in the life and pensions industry and in relevant professional bodies such as the Institute and Faculty of Actuaries and National Association of Pension Funds), non-party political organisations (such as the Fabian Society and TUC), think tanks with an interest in pension reform, and journalists. Thereby, these actors will be drawn into a debate with the project.
2. Likewise, the proposed 'witness seminar' will draw policy actors into an engagement with the project either as 'witnesses' of policy development in the 1980s or as audience members invited during the seminar to add their views to the historical record. We aim to hold this at the Department for Work and Pensions. A full transcript of this seminar will be freely published on-line (using the University of Bristol's online 'Repository of Scholarly Eprints'), with an edited version published in a relevant journal.
3. The project conference will be aimed not just at academics but at the broad policy universe specified above, with invitations extended to a large number of such non-academic actors. The model will be an earlier very successful conference, on the history of and policy responses to the international pensions crisis, organised by the PI with others at the British Academy in 2004, and well attended by such actors. To facilitate attendance by non-academics, most of them based in the capital, the conference will be held in London. We hope once again to interest the British Academy in hosting it.
4. Past experience suggests that specialist journalists will be interested in the project's findings and existing relationships with such journalists will be cultivated and new ones developed, for example by interviewing them (several are sufficiently experienced to be primary sources in their own right) and by inviting them to chair witness seminars and conference panel discussions.
5. Project personnel will write a paper for and develop a PR strategy with 'History and Policy', an organisation that is part of the new Institute of Contemporary History at King's College London and which publishes high quality historical research freely accessible online and creates opportunities for historians, policy makers and journalists to connect. (It was via History and Policy, for example, that the PI's co-edited book Britain's Pensions Crisis: History and Policy was launched at the House of Commons with a debate, chaired by a senior Financial Times journalist, between the Minister of Pensions, a member of the Pensions Commission, and one of the editors).
6. Briefing notes will be produced and disseminated to current policy makers.
7. A project blog written by the PI, CI & RA will be developed (and later archived on Bristol's 'Repository of Scholarly Eprints') to keep interested parties in touch with its work, events, and findings. The PI will also work with the University of Bristol's press office to develop a series of press releases aimed at newspapers (both quality and 'tabloid'), technical journals and the 'blogosphere'.
8. The project's findings will be presented in the University's 'Twilight talk' series of public discussions.
The project will utilise a number of tools for wider engagement used already in different contexts to engage with policy actors.
1. Interviews will be conducted with politicians, advisers, civil servants, business (both firms in the life and pensions industry and in relevant professional bodies such as the Institute and Faculty of Actuaries and National Association of Pension Funds), non-party political organisations (such as the Fabian Society and TUC), think tanks with an interest in pension reform, and journalists. Thereby, these actors will be drawn into a debate with the project.
2. Likewise, the proposed 'witness seminar' will draw policy actors into an engagement with the project either as 'witnesses' of policy development in the 1980s or as audience members invited during the seminar to add their views to the historical record. We aim to hold this at the Department for Work and Pensions. A full transcript of this seminar will be freely published on-line (using the University of Bristol's online 'Repository of Scholarly Eprints'), with an edited version published in a relevant journal.
3. The project conference will be aimed not just at academics but at the broad policy universe specified above, with invitations extended to a large number of such non-academic actors. The model will be an earlier very successful conference, on the history of and policy responses to the international pensions crisis, organised by the PI with others at the British Academy in 2004, and well attended by such actors. To facilitate attendance by non-academics, most of them based in the capital, the conference will be held in London. We hope once again to interest the British Academy in hosting it.
4. Past experience suggests that specialist journalists will be interested in the project's findings and existing relationships with such journalists will be cultivated and new ones developed, for example by interviewing them (several are sufficiently experienced to be primary sources in their own right) and by inviting them to chair witness seminars and conference panel discussions.
5. Project personnel will write a paper for and develop a PR strategy with 'History and Policy', an organisation that is part of the new Institute of Contemporary History at King's College London and which publishes high quality historical research freely accessible online and creates opportunities for historians, policy makers and journalists to connect. (It was via History and Policy, for example, that the PI's co-edited book Britain's Pensions Crisis: History and Policy was launched at the House of Commons with a debate, chaired by a senior Financial Times journalist, between the Minister of Pensions, a member of the Pensions Commission, and one of the editors).
6. Briefing notes will be produced and disseminated to current policy makers.
7. A project blog written by the PI, CI & RA will be developed (and later archived on Bristol's 'Repository of Scholarly Eprints') to keep interested parties in touch with its work, events, and findings. The PI will also work with the University of Bristol's press office to develop a series of press releases aimed at newspapers (both quality and 'tabloid'), technical journals and the 'blogosphere'.
8. The project's findings will be presented in the University's 'Twilight talk' series of public discussions.
Publications
DAVIES A
(2017)
'EVERYMAN A CAPITALIST' OR 'FREE TO CHOOSE'? EXPLORING THE TENSIONS WITHIN THATCHERITE INDIVIDUALISM
in The Historical Journal
Davies A
(2019)
Pension Funds and the Politics of Ownership in Britain, c. 1970-86.
in 20 century British history
Davies A
(2022)
Thatcher's Policy Unit and the "Neoliberal Vision"
in Journal of British Studies
Freeman J
(2021)
The Neoliberal Age? Britain since the 1970s
Pemberton H
(2017)
WASPI 's Is (Mostly) a Campaign for Inequality
in The Political Quarterly
Pemberton Hugh
(2024)
A Neoliberal Revolution?: Thatcherism and the Reform of British Pensions
Description | The project applied for and recieved a covid-19 related extension. The research was successfully completed but the publication of the monograph was dealyed (partly due to the retired PIs health). We are immimently submitting the final manuscript and expect publication to follow shortly. Our research has revealed that the 1983-7 Conservative government had grander ambitions even than the abolition of the State Earnings-Related Pension Scheme and the institution of a new system of 'personal pensions' - for we have found clear evidence of sympathy (not least in No.10) with the idea that occupational pension funds, through their intermediation between individual pension savers and the firms in which their pension contributions were invested, were reservoirs of institutional power antithetical to individual freedom which needed to be dismantled. In short, the aim of some within government was to sweep away the entire architecture of British pensions other than a minimalist basic state pension and replace it wholesale with a species of 'self-invested personal pension' in which individuals would invest directly in British capitalism, thus giving them a personal stake in its future. There are clear links here not just with emerging neoliberal ideas about individual freedom and the superiority of the free-market but with longer-held views within the Conservative Party about the utility and desirability of a 'property-owning democracy'. We have now thoroughly explored the detailed mechanics of the process by which this desire was thwarted and are near to publishing our key output (the monograph) that theorises and demonstrates this process as a whole. We have continued to publish in international journals in the meantime, with a new article in the Journal of British Studies released in December 2022. Moreover, we have used these findings to begin making important revisions to the literature on international think tanks and their impacts on Governments. A high-profile article in the Journal of British Studies has been accepted, making the case for the importance of alliances between these organizations and key individuals in the heart of Thatcher's government. The project's findings will therefore now also shift our understanding of late-twentieth century government practices and the roots of our present-day policy generation system. This journal's international audience is important is disseminating the project's findings to the widest possible audience. In addition, our research has served to reveal fundamental tensions within Thatcherite conceptualisations of the 'individual'. For example, should that individual be seen as a capitalist or a consumer, were they conceived as a prudent saver or a risk-taking investor, and were they fundamentally rational or irrational? These tensions themselves reflected, in part, conflicts within the diverse tapestry of post-war neoliberal thought. Ultimately, our research serves to demonstrate that the ideal of creating a society of entrepreneurial investor capitalists was discarded when faced with practical constraints, and that this cemented the Thatcherite preference for giving individuals the freedom to choose within a competitive market. In short, it is too simplistic to see that Thatcher governments has having 'implemented neoliberalism'. Rather strands of neoliberalism were in tension with each other and those governments may better be seen as having selected from a palette of neoliberal ideas against a background of institutional opposition, political controversy, the desire to recraft Conservative 'statecraft' to ensure re-election, and internal government infighting. This overarching finding is published in another high-profile journal article in the Historical Journal and has begun to be widely cited in the latest literature on british neoliberalism. Members of the team have also made significant findings about the broader intellectual apparatus used by actuaries during this period and have related the change in financial products offered to a combination of intellectual, structural, and wider economic shifts. These findings have been disseminated through further high-quality journal articles. The project's PhD student successfully defended his thesis which is recognised as making a significant contribution to our understanding of the life assurance and investment product industries operations as well as the actuarial profession. The project team have also published chapters in edited collections revealing the interactions between neoliberalism and conservatism. |
Exploitation Route | We will continue to take these findings forward. Much of this has already taken place. For example, we held a joint 'witness seminar' with the Institute and Faculty of Actuaries at which key actors from the 1980s came together to discuss Norman Fowler's 'Inquiry into Provision for Retirement' in front of an audience of academics, actuaries, other pension professionals and financial journalists. We continue to explore other avenues for communicating our findings to non-academic actors in association with the monograph's publication, including engagement with MPs, Parliamentary libraries, think tanks, and Whitehall departments. |
Sectors | Financial Services and Management Consultancy Government Democracy and Justice |
Description | One key impact can be reported before the main output of the research is published: 1) In our submission to the Treasury's consultation on its proposals for changes to the taxation of pensions we warned of a crucial lesson of history: that such a change would not simplify the system, as claimed, but would instead install yet another layer of complexity on what is already the most complex system in the world of old-age income replacement. If money had to be saved, we counselled the Treasury instead to eliminate tax relief on pension contributions for higher-earners. Early indications were that the Treasury had decided to do just this - and this was confirmed in the 2016 budget. The topic is returning to the agenda i and we will look for further opportunities to input with the publication of the project monograph. The project's current PI has also disseminated the project's findings through television documentary and more indirectly through radio interviews. More broadly, the team has needed to revise its impact plans after the retirement of the project's PI, Professor Hugh Pemberton and the impact of COVID-19. The project's monograph will be accompanied by policy briefing and related work. |
First Year Of Impact | 2016 |
Sector | Government, Democracy and Justice |
Impact Types | Societal Economic Policy & public services |
Description | Response to HM Treasury's Consultation Document Cm 9102 (Strengthening the incentive to save: a consultation on pensions tax relief) |
Geographic Reach | National |
Policy Influence Type | Contribution to a national consultation/review |
Description | Institute and Faculty of Actuaries |
Organisation | Institute and Faculty of Actuaries |
Country | United Kingdom |
Sector | Charity/Non Profit |
PI Contribution | Through research conducted by the project's PhD student, Thomas Gould, the project forged a link with the Institute and Faculty of Actuaries as a result of which a witness seminar on Britain's 1986 personal pension reforms (involving policy makers and pension professionals including a past president of the IFoA) was organised in association with the IFoA and held at its headquarters at Staple Inn, London on 6 Dec 2017. The event, introduced by the IFoA's immediate past president, included an introductory paper by the project's PI, Hugh Pemberton, and a discussion of the witness's testimony by an audience compromising actuaries, other pensions professional, and academics. |
Collaborator Contribution | The witness seminar panel was put together by the project, and the introductory briefings and the paper presented at the event were also written by project team members. Organisation of the event, however, including the making of a transcription of proceedings and the making and loading online of a video of the two-hour event, was provided by the IFoA. |
Impact | Transcript and video of the witness seminar and its oral history testimony (available via the link provided).. |
Start Year | 2016 |
Description | Article in Financial Times, 4 April 2015 |
Form Of Engagement Activity | A magazine, newsletter or online publication |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Public/other audiences |
Results and Impact | Opinion piece in Money section of Financial times, 4 April 2015 (' 'We're in danger of forgetting why annuities were invented' by H. Pemberton) arguing that the government's 'pension freedom' reforms could lead to those exercising them running out of replacement income in old age. The challenges of rising longevity, it was argued, strongly favoured risk pooling rather than individualisation of financial risk taking. |
Year(s) Of Engagement Activity | 2015 |
URL | http://www.ft.com/cms/s/0/21433938-d875-11e4-8a68-00144feab7de.html#axzz3XqdwP2wG |
Description | Paper presented at the Institute and Faculty of Actuaries |
Form Of Engagement Activity | Participation in an activity, workshop or similar |
Part Of Official Scheme? | No |
Geographic Reach | National |
Primary Audience | Professional Practitioners |
Results and Impact | A 20 minute paper on the Fowler Inquiry into Provision for Retirement and the subsequent government pension reforms of 1986, presented at Staple Inn, London, at an event organised by the project in association with the Institute and Faculty of Actuaries. The paper provided the background and line of questioning for a witness seminar involving pension practioners and policy-makers. |
Year(s) Of Engagement Activity | 2017 |
URL | https://pensions-history.uk/thatchers-pension-reforms/events/the-fowler-inquiry-into-provision-for-r... |
Description | Witness seminar on the Fowler Inquiry into Provision for Retirement and the pension reforms of 1986 |
Form Of Engagement Activity | A formal working group, expert panel or dialogue |
Part Of Official Scheme? | No |
Geographic Reach | National |
Primary Audience | Professional Practitioners |
Results and Impact | On 6 December 2017, the University of Bristol's Thatcher's Pension Reforms research project in association with the Institute and Faculty of Actuaries held a very well-attended 'witness seminar' in front of an invited audience at Staple Inn, London at which Sir Nicholas Montagu, Chris Daykin, Sir Adam Ridley and Marshall Field discussed their respective roles in the Fowler Inquiry into Provision for Retirement and its relationship to the Conservative government's landmark reforms to British pensions in 1986. The session was chaired by Gregg McClymont (then head of pensions research at Aberdeen Asset Management. It was introduced by Colin Wilson, the immediate past President of the IFoA, and began with a paper by Professor Hugh Pemberton (University of Bristol). The witness seminar was followed by a lively discussion, from which important additional testimony was obtained. There was great interest expressed in a follow-up seminar on the legacy of the 1986 reforms. The seminar was recorded and a video is available on the project website. A transcript of the seminar and of the succeeding Q&A is also available. |
Year(s) Of Engagement Activity | 2017 |
URL | https://pensions-history.uk/thatchers-pension-reforms/events/the-fowler-inquiry-into-provision-for-r... |