In 2010, only 19 percent of individuals ages 50-58 whose household incomes were less than 300 percent of the poverty line participated in a pension of any kind at their current jobs, compared to 56 percent of those above 300 percent of poverty. 
This paper investigates this pension gap. In particular, we decompose the pension participation rate into its four elements in order to compare coverage between higher- and lower-income individuals:
1) the fraction of people who are currently working (the employment rate);
2) the fraction of workers who are in firms that offer pension benefits to at least some workers (the offer rate);
3) the fraction of workers who are eligible for pension benefits, conditional on being in a firm where it is offered (the eligibility rate); and
4) the fraction of workers who enroll in a pension plan when they are eligible (the take-up rate).
We find that the substantial pension gap between higher- and lower-income individuals is driven primarily by the lower-income group’s lower employment rate and the smaller probability of working for an employer that offers pensions; when lower-income workers do have a pension plan at work, their eligibility and take-up rates are nearly equivalent to higher-income workers. We also find that the factors associated with a higher value for each element of pension participation are very consistent: higher education and income, previous pension history, and job characteristics including firm size, occupation, job tenure, and union status.
Together, these findings suggest that policies such as automatic enrollment that focus on pension eligibility or take-up are unlikely to close the pension coverage gap between older, lower-income individuals and their higher-income contemporaries; instead, greater pension participation requires more jobs and, in particular, more “good jobs.”
Chosen excerpts by Job Market Monitor. Read the whole story at Lower-Income Individuals Without Pensions: Who Misses Out and Why? | Center for Retirement Research.
Related articles
- Older Workers / How long do older unemployed workers conduct their job searches before deciding to retire ?
- US – What can be done about the rampant underfunding of public pension systems?
- US / State of Local Government Pensions: aggregate unfunded liabilities of $574 billion
- Pension in UK / Introduce a ‘collective defined contribution’ plan says a report
- US / The retirement system fails most americans by creating a few big winners and many losers
- Benefits Overview in US / 68 % of workers have access to a pension plan
- UK | Millions of workers force to work past 75
- UK / One in five retiring in 2013 in poverty
- US / Corporate pension funding: the Gap jumped 17 percent to $295.2 billion
Discussion
No comments yet.