The project mapped the current ‘welfare mix’ with regard to main forms of public welfare provision as well as options for private management of income security and risk protection - and to assess the changing contours of this mix over time. It investigated how and why some middle class households plan for contingencies and invest in insurance against social risks and contingencies listed above, while other households do not make such arrangements. We intended to examine the respective impact of household income, occupational and partnership status, gender, number of children and biographical background. What role do households’ existing insurance packages play, i.e. protection through state, occupational welfare and private insurance? What is the impact of individual perceptions of risks, attitudes to time and money, or the quality of the relationship within households?
The project explored variations in attitudes towards public and private risk protection and actual risk management behaviour between Scotland and England.
The overall aim of the project was to examine income protection of British households with above average income. The project analysed households’ behaviour and attitudes towards public, occupational and private ways of dealing with risks and contingencies in five areas: unemployment, sickness, retirement, the need for long-term care and covering the cost of children attending higher education.
A review of existing research revealed that for households with above average earnings the level of public provision (e.g. benefits or grants) has declined in relation to earnings and thus become even less relevant in recent years than it was in the early 1990s. Quantitative analyses confirmed that private (personal) insurance plays a role in three areas (pensions, sickness, redundancy) but has generally remained a niche product, providing supplementary income protection at best. Interviews with 61 couples in Scotland and England suggest that occupational welfare remains a very important source of income protection for this particular demographic group. However, the extent and generosity of provision is highly variable and appears to be declining rather than expanding. While this finding is clear for pensions, it cannot be generalised for all areas, due to a lack of systematic information about occupational income protection. Finally, interviews and secondary survey analyses revealed a strong reliance on various ‘other’ types of income protection, such as confidence in employability, additional earnings, property wealth and savings. Variations in the perceived reliance on these forms of income protection are particularly associated with level of household income and size of employer.
One of the most interesting findings of the overview of the public/private provision was the discrepancy between the need to rely on market provision and the lack of market transparency. Stage A of the project demonstrated how low public entitlements are across policy areas (pensions, sickness, unemployment, long-term care and also support for the cost of higher education), and how significant non-state provision is for middle income households. However, neither systematic public information nor academic studies exist that would allow a comprehensive assessment of the quality of non-state benefits by types of employer or sector. The situation is somewhat better with regard to pensions, but here, too, specific information is rare. Welfare markets are opaque and householders make decisions without access to comparative information.
The secondary analysis of large scale survey data showed that private insurance markets play only a small part in the security packages of the English and Scottish population. This has not increased over the past 15 years. In particular, long term care insurance is held by less than one per cent of even our core group of better-off families, who were more likely to hold private insurances than other households. With the exception of the recently discredited MPPI, and life insurances, holding private insurances against income loss due to unemployment or sickness largely remains a niche behaviour, often correlated with high occupational status and high income. Survey data made available by the Association of British Insurers suggest that there is a strong reliance on various other private sources of income protection, such as the ability to curtail expenditure, to draw upon property wealth or turn to family and friends. A search of publicly available survey data also revealed gaps in the information available in terms of how parents might be saving specifically for children’s education and in terms of occupational income protection (sickness and redundancy).
Public provision was almost absent in the perception and actual risk management strategies of middle income households. In a range of cases, most notably regarding pensions, householders did not expect any public benefits. Nevertheless, many interviewees felt protected because of their large public or private employers. On the whole, couples relied on occupational benefits more than on any other form of income protection.
Regarding pensions, unemployment and sickness, ‘monos’ relied on their employer exclusively; and those with confidence tended to be older and had higher incomes. ‘Duos’ combined occupational provision with one other source of income protection: insurance, savings, property or work. ‘Multis’ (generally with heterogeneous employment careers) relied on a patchwork of protection.
Most couples felt not much affected by the financial crisis. Among those materially affected, most felt capable of adjusting their circumstances. Only very few suffered a loss but did not have the capacity to respond. Out of the five areas the need to pay for children at higher education was singled out as the most relevant area of income management by two thirds of all respondents. Interestingly, there were no systematic differences between Scotland and England in this or other areas.