Family Finance Surveys User Conference 2016

1. Does the provision of workplace pensions affect
other 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 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion

2. 1 Introduction
2 Workplace schemes → other savings
Data
Empirical strategy
Results
3 Discussion
2 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline

3. 1 Introduction
2 Workplace schemes → other savings
Data
Empirical strategy
Results
3 Discussion
3 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline

4. 3 pillars: each one requires different degrees of ability to
process information and make informed decisions:
4 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving and investing for retirement
How could saving rates be increased?

5. 1 Duty on employers = mandatory provision;
2 Incentive = matching contributions;
3 Auto-enrolment to overcome behavioural barriers to opt-in.
5 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
UK Pensions Act 2008

6. Identification and endogeneity problems
6 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving and investing for retirement

7. 1 Introduction
2 Workplace schemes → other savings
Data
Empirical strategy
Results
3 Discussion
7 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline

8. Membership → Other savings
Workplace pension scheme provision and membership;
Personal pension plan and other saving attitudes;
Job characteristics;
Socio-demographics.
8 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasets
BHPS (1992-2009) and WAS(2008-2012)

9. Membership → Other savings
Workplace pension scheme provision and membership;
Personal pension plan and other saving attitudes;
Job characteristics;
Socio-demographics.
8 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasets
BHPS (1992-2009) and WAS(2008-2012)

10. Membership → Other savings
Workplace pension scheme provision and membership;
Personal pension plan and other saving attitudes;
Job characteristics;
Socio-demographics.
8 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasets
BHPS (1992-2009) and WAS(2008-2012)

11. Membership → Other savings
Workplace pension scheme provision and membership;
Personal pension plan and other saving attitudes;
Job characteristics;
Socio-demographics.
8 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Two nationally representative datasets
BHPS (1992-2009) and WAS(2008-2012)

12. 9 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Proportions of key variables
British Household Panel Survey (1992-2009)

13. 10 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Proportions of key variables
Wealth and Assets Survey (2008-2012)

14. 11 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Personal pension plan membership
BHPS(left) and WAS(right)

15. 12 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Saving practice
BHPS(left) and WAS(right)

16. Identification and endogeneity problems
13 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Empirical strategy: Instrumental Variable

17. 1st
Stage
Pr[pit = 1] = α1 + φ1Nit + β1Xit + ω1t + ε1it
2nd
Stage
Pr[yit = 1] = α2 + δ2ˆpit + β2Xit + ω2t + ε2it
pit = an indicator variable denoting whether the employer runs
a pension scheme, Nit = is a vector of categorical variables
indicating # workers at job place (scale 1-9), Xit = a vector of
control variables, yit = is the outcome variable.
14 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Empirical strategy: Instrumental Variable
Two-Stage Least Squares - 2SLS

18. 15 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension provision → other savings
British Household Panel Survey

19. 16 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savings
British Household Panel Survey

20. 17 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savings
British Household Panel Survey

21. 18 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension provision → other savings
Wealth and Assets Survey

22. 19 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savings
Wealth and Assets Survey

23. 20 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Pension membership → other savings
Wealth and Assets Survey

24. 1 Evidence of a negative effect (substitution) of workplace
pension 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 universal
provision of workplace plans.
21 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion

25. 1 Evidence of a negative effect (substitution) of workplace
pension 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 universal
provision of workplace plans.
21 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion

26. 1 Evidence of a negative effect (substitution) of workplace
pension 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 universal
provision of workplace plans.
21 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Conclusion

27. 1 Introduction
2 Workplace schemes → other savings
Data
Empirical strategy
Results
3 Discussion
22 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
Outline

28. 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 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?

29. 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 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?

30. 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 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?

31. 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 / 23
Does the provision of workplace pensions affect other savings?
Introduction Workplace schemes → other savings Discussion
How could saving rates be increased?

32. =-1000pt =-1000pt
24 / 23
Does the provision of workplace pensions affect other savings?
Bernardo Fonseca Nunes
Behavioural Science Centre
Twitter: @_bernardofn
University of Stirling
Scotland
Email: bernardo.fonsecanunes@stir.ac.uk
www.stir.ac.uk