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The Impact of Occupation and Gender on Pensions from Defined Contribution Plans

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  • David Blake

    (Pensions Institute, Cass Business School, 106 Bunhill Row, London EC1Y 8TZ, U.K.)

  • Andrew Cairns

    (Maxwell Institute, Heriot-Watt University, Edinburgh, U.K.)

  • Kevin Dowd

    (Centre for Risk and Insurance Studies, Nottingham University Business School, Nottingham, U.K.)

Abstract

We present simulation results for the likely pension outcomes for different defined-contribution (DC) pension plan members distinguished by occupation and gender. While our results suggest that key differences between outcomes depend on the strategic asset allocation strategy chosen (and hence on the rate of return on assets in relation to the growth rate in salaries), we also find that DC plans benefit most those workers who have the highest career average salary relative to final salary or whose salary peaks earliest in their careers. Thus low-skilled workers and women do relatively well from DC plans: the largest median pension difference between occupations is 34 per cent (for men) and 38 per cent (for women), while the largest median pension difference between women and men in the same occupation is 45 per cent (for the same contribution rate). We conclude that key aspects of plan design (in particular contribution rates) should be occupation- and gender-specific. The Geneva Papers (2007) 32, 458–482. doi:10.1057/palgrave.gpp.2510141

Suggested Citation

  • David Blake & Andrew Cairns & Kevin Dowd, 2007. "The Impact of Occupation and Gender on Pensions from Defined Contribution Plans," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 32(4), pages 458-482, October.
    • Handle: RePEc:pal:gpprii:v:32:y:2007:i:4:p:458-482
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    Citations

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    Cited by:

    1. Blake, David & Wright, Douglas & Zhang, Yumeng, 2014. "Age-dependent investing: Optimal funding and investment strategies in defined contribution pension plans when members are rational life cycle financial planners," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 105-124.
    2. Blake, David & Wright, Douglas & Zhang, Yumeng, 2013. "Target-driven investing: Optimal investment strategies in defined contribution pension plans under loss aversion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 195-209.
    3. Gregorio Impavido & Esperanza Lasagabaster & Manuel Garcia-Huitron, 2010. "New Policies for Mandatory Defined Contribution Pensions : Industrial Organization Models and Investment Products," World Bank Publications, The World Bank, number 2462, September.
    4. Owadally, Iqbal & Jang, Chul & Clare, Andrew, 2021. "Optimal investment for a retirement plan with deferred annuities allowing for inflation and labour income risk," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1132-1146.
    5. Gregorio Impavido & Esperanza Lasagabaster & Manuel Garcia-Huitron, 2010. "New Policies for Mandatory Defined Contribution Pensions : Industrial Organization Models and Investment Products," World Bank Publications - Books, The World Bank Group, number 2462, December.
    6. Blake, David & Cairns, Andrew & Dowd, Kevin, 2008. "Turning pension plans into pension planes: What investment strategy designers of defined contribution pension plans can learn from commercial aircraft designers," MPRA Paper 33749, University Library of Munich, Germany.

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