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Does the provision of workplace pensions affectother savings?
Evidence from the United Kingdom
Bernardo Fonseca Nunesa
a Behavioural Science Centre, University of Stirling
01/July/2016, Family Finance Surveys User Conference
1 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
1 Introduction
2 Workplace schemes → other savingsDataEmpirical strategyResults
3 Discussion
2 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline
1 Introduction
2 Workplace schemes → other savingsDataEmpirical strategyResults
3 Discussion
3 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline
3 pillars: each one requires different degrees of ability toprocess information and make informed decisions:
4 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving and investing for retirementHow could saving rates be increased?
1 Duty on employers = mandatory provision;2 Incentive = matching contributions;3 Auto-enrolment to overcome behavioural barriers to opt-in.
5 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
UK Pensions Act 2008
Identification and endogeneity problems
6 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving and investing for retirement
1 Introduction
2 Workplace schemes → other savingsDataEmpirical strategyResults
3 Discussion
7 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline
Membership → Other savingsWorkplace pension scheme provision and membership;Personal pension plan and other saving attitudes;Job characteristics;Socio-demographics.
8 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasetsBHPS (1992-2009) and WAS(2008-2012)
Membership → Other savingsWorkplace pension scheme provision and membership;Personal pension plan and other saving attitudes;Job characteristics;Socio-demographics.
8 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasetsBHPS (1992-2009) and WAS(2008-2012)
Membership → Other savingsWorkplace pension scheme provision and membership;Personal pension plan and other saving attitudes;Job characteristics;Socio-demographics.
8 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasetsBHPS (1992-2009) and WAS(2008-2012)
Membership → Other savingsWorkplace pension scheme provision and membership;Personal pension plan and other saving attitudes;Job characteristics;Socio-demographics.
8 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasetsBHPS (1992-2009) and WAS(2008-2012)
9 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Proportions of key variablesBritish Household Panel Survey (1992-2009)
10 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Proportions of key variablesWealth and Assets Survey (2008-2012)
11 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Personal pension plan membershipBHPS(left) and WAS(right)
12 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving practiceBHPS(left) and WAS(right)
Identification and endogeneity problems
13 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Empirical strategy: Instrumental Variable
1stStage
Pr[pit = 1] = α1 + φ1Nit + β1Xit + ω1t + ε1it
2ndStage
Pr[yit = 1] = α2 + δ2p̂it + β2Xit + ω2t + ε2it
pit = an indicator variable denoting whether the employer runsa pension scheme, Nit = is a vector of categorical variablesindicating # workers at job place (scale 1-9), Xit = a vector ofcontrol variables, yit = is the outcome variable.
14 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Empirical strategy: Instrumental VariableTwo-Stage Least Squares - 2SLS
15 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension provision → other savingsBritish Household Panel Survey
16 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savingsBritish Household Panel Survey
17 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savingsBritish Household Panel Survey
18 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension provision → other savingsWealth and Assets Survey
19 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savingsWealth and Assets Survey
20 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savingsWealth and Assets Survey
1 Evidence of a negative effect (substitution) of workplacepension and personal plan membership;
2 No evidence of a negative effect on other saving attitudes,for example, saving in a bank or financial assets.
3 Policy application: pension reforms based on universalprovision of workplace plans.
21 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion
1 Evidence of a negative effect (substitution) of workplacepension and personal plan membership;
2 No evidence of a negative effect on other saving attitudes,for example, saving in a bank or financial assets.
3 Policy application: pension reforms based on universalprovision of workplace plans.
21 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion
1 Evidence of a negative effect (substitution) of workplacepension and personal plan membership;
2 No evidence of a negative effect on other saving attitudes,for example, saving in a bank or financial assets.
3 Policy application: pension reforms based on universalprovision of workplace plans.
21 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion
1 Introduction
2 Workplace schemes → other savingsDataEmpirical strategyResults
3 Discussion
22 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline
1 Relevance of the 2nd Pillar;2 Examples: United Kingdom, New Zealand, Sweden,
Netherlands;3 No evidence of a crowding-out on other non-pension
savings;4 Further research: effect on firms’ costs and price levels.
23 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?
1 Relevance of the 2nd Pillar;2 Examples: United Kingdom, New Zealand, Sweden,
Netherlands;3 No evidence of a crowding-out on other non-pension
savings;4 Further research: effect on firms’ costs and price levels.
23 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?
1 Relevance of the 2nd Pillar;2 Examples: United Kingdom, New Zealand, Sweden,
Netherlands;3 No evidence of a crowding-out on other non-pension
savings;4 Further research: effect on firms’ costs and price levels.
23 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?
1 Relevance of the 2nd Pillar;2 Examples: United Kingdom, New Zealand, Sweden,
Netherlands;3 No evidence of a crowding-out on other non-pension
savings;4 Further research: effect on firms’ costs and price levels.
23 / 23Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?
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24 / 23Does the provision of workplace pensions affect other savings?
Bernardo Fonseca Nunes
Behavioural Science CentreTwitter: @_bernardofnUniversity of StirlingScotland
Email: [email protected]
www.stir.ac.uk
