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Persistency of pension contributions in the UK: Evidence from aggregate and micro-data

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  • Sarah Smith

Abstract

This paper presents evidence on the persistency of contributions to individual pensions, including an analysis of micro-data from the British Household Panel Survey. It finds variation in persistency rates by gender, earnings and household income. Changes in income and consumption needs (for example, becoming unemployed or the arrival of a new baby) increase the probability of lapse, but household income also matters, suggesting that pensions may be less affordable for those on low incomes, even in the absence of shocks. The introduction in 2001 of stakeholder pensions, with a charge cap of 1% of fund value, transfers the financial penalty associated with lapsing from consumers to providers. Arguably this will makes it less likely that pensions are sold to those for whom they are less suitable. The only risk is if providers walk away from low income groups altogether.

Suggested Citation

  • Sarah Smith, 2006. "Persistency of pension contributions in the UK: Evidence from aggregate and micro-data," The Centre for Market and Public Organisation 06/139, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:06/139
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp139.pdf
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    Cited by:

    1. Saime S KAYAM & Merih CELİKTOPUZ & Mehmet KORAY PARKIN, 2013. "Features That Influence The Exit Decision From The Private Pension System In Turkey," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 4(2), pages 145-155.
    2. Vikas GAUTAM & Mukund KUMAR, 2012. "A Study On Attitudes Of Indian Consumers Towards Insurance Services," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 4(1), pages 51-62, March.
    3. Iniobong Bassey Inyang & Emem Bassey Inyang & Bassey Ime Frank, 2019. "Impairments Analytics Of Consumption Of Children Education Insurance Policy Among Households In Agrarian And Non-Agrarian Areas Of Akwa Ibom State," Noble International Journal of Social Sciences Research, Noble Academic Publsiher, vol. 4(2), pages 33-42, February.
    4. Yilmaz Yildiz & Mehmet Baha Karan & Seyma Bayrak Salantur, 2017. "An Investigation on Early Voluntary Withdrawals from Individual Retirement Accounts: An Empirical Study on an Emerging Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 732-756, October.

    More about this item

    Keywords

    Pension contributions; persistency.;

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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