Correspondence: Vrinda Gupta, 2nd Floor, Golf View Towers A, Sector 42, DLF Phase 5, Gurgaon, India. E-mail: vrinda.gupta@watsonwyatt.com

¹is an economist at Watson Wyatt Worldwide, Delhi. Here she has been involved in research in diverse areas like offshoring, pension and compensation. Prior to joining Watson Wyatt in 2004, she was a Research Assistant at the Centre for Development Economics, Delhi School of Economics. Her research was focused on monetary policy transmission in the Indian economy. She obtained an M. Phil degree at Delhi School of Economics with her research area being agricultural exports and poverty.

Received 25 October 2006; Revised 25 October 2006.

Abstract

The literature shows that different market entities take into account the level of underfunding in the pension accounts while valuating firms. This paper analyses whether employees with a defined benefit pension scheme perceive risk to their expected income in retirement while forming their opinions about the long-term business success of their employer. Using a matched dataset of pension risk indicators for FTSE 100 companies and data from employees' opinion in the UK, the research shows that employees do seem to care about the level of funding of their benefits scheme when comparing their benefits with other companies and the industry average. But these concerns do not seem to affect their perception of the management or their confidence in business success and commitment to the firm.