Durable case for higher pension

June 19, 1998

As the government contemplates a wide-ranging reform of the welfare and benefits system, it should look seriously at improving the benefits for the oldest pensioners.

That conclusion emerges from a study of the budgeting behaviour of retired households conducted under the ESRC's economic beliefs and behaviour project by Edmund Chattoe, research fellow in University of Surrey's sociology department, and Nigel Gilbert, Surrey's professor of sociology.

Mr Chattoe said the findings have implications for other benefits: " The same case can be made for improving benefits for the long-term unemployed."

Current policy is based on analysis provided almost entirely by economists, and this lacks a behavioural element. "It tells you a lot about how much people spend. It says much less about the thinking that leads to purchasing decisions," Professor Chattoe said.

He and Mr Chattoe shifted the focus to decision-making by using qualitative data from interviews with about 30 retired households rather than quantitative material. One finding was that some people who are better off do not budget as such.

The finding that underpins their view on benefits comes from an examination of the importance of durable goods. They point out that these can be defined much more widely than in the traditional economists' view, which sees them as relatively rare, costly purchases - a car being the typical example.

Mr Chattoe and Professor Gilbert argue that almost everything but fresh food can be regarded as in some way durable.

Durable goods tend to be seen as providing people with some security because of their durability. The research notes the number of old people who said they had enough clothes "to see them out".

But Mr Chattoe says that durable goods are also a constant source of insecurity. "The evidence I is that a lot of pensioners do quite well until some major durable like the car or the boiler fails and has to be replaced or undergo expensive repairs. You can hope that your car or your central heating will last for a long time, you cannot be absolutely certain about it."

This inevitably falls hardest on the oldest and most vulnerable. "It is quite common for people to make big decisions just before retirement - decide whether to keep the car, get their heating sorted out and so on. But inevitably things start to wear out and go wrong. There is a limit to how far you can defer the expenditure."

Hence the case for enhanced benefits for the very old or the very long-term unemployed. Mr Chattoe suggests that one-off payments or loans might be an alternative to an increase in the weekly benefit.

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