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

We present simulation results for the likely pension outcomes (measured in terms of the distribution of the pension ratio of actual pension to some fraction of final salary) for different defined contribution pension plan members distinguished by occupation and gender. Whilst 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 earnings), 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 pension difference between occupations is 34% (for men) and 38% (for women), while the largest pension difference between women and men in the same occupation is 45%. We conclude that key aspects of plan design (in particular contribution rates) should be occupationand gender-specific.