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Individual pension-related risk propensities: the effects of socio-demographic characteristics and a spousal pension entitlement on risk attitudes

Published online by Cambridge University Press:  03 November 2008

GORDON L. CLARK  and
KENDRA STRAUSS
GORDON L. CLARK
Affiliation:
Centre for the Environment, University of Oxford, UK. Labor and Worklife Program, Harvard Law School, Cambridge, Massachusetts, USA.
KENDRA STRAUSS*
Affiliation:
Centre for the Environment, University of Oxford, UK.
*
Address for correspondence: Kendra Strauss, Oxford University Centre for the Environment, South Parks Road, Oxford OX1 3QY, UK. E-mail: [email protected]
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Abstract

The transition from defined-benefit to defined-contribution occupational-pension plans has placed a premium on the participants' or contributors' decision-making competence. Their attitudes to risk and their responses to available investment options can have far-reaching implications for their retirement income. Behavioural research on risk and uncertainty has raised understanding of the limits of individual decision-making, but the social status and demographic characteristics of plan participants may also affect risk perception and pension choices. By studying a random sample of the British adult population, this paper explores the significance of socio-demographic characteristics for pension-related risk attitudes. It is demonstrated that pension-plan participants do not appear to understand the risks associated with different types of retirement savings and pension plans. The paper also shows that the gender, age and income of plan participants can give rise to distinctive risk propensities, and that marital status and, in particular, whether a spouse also has a pension can also have significant consequences for household risk preferences. These results have implications for those segments of the population that are disadvantaged in the labour market. Employer-provided pensions' education and information programmes may have to be more basic and more closely tailored to the social status of pension plan participants than hitherto assumed or hoped.

Keywords

Genderpension risksocio-demographic statusspousal entitlements
Type
Research Article
Information
Ageing & Society , Volume 28 , Issue 6 , June 2008 , pp. 847 - 874
Copyright
Copyright © 2008 Cambridge University Press

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