1. ^aPensions Institute, Cass Business School, 106 Bunhill Row, London EC1Y 8TZ, U.K. E-mail: d.blake@city.ac.uk
2. ^bMaxwell Institute, Heriot-Watt University, Edinburgh, U.K.
3. ^cCentre for Risk and Insurance Studies, Nottingham University Business School, Nottingham, U.K.

^*Kevin Dowd would like to thank the ESRC for financial support under grant RES-000-27-0014.

Abstract

We present simulation results for the likely pension outcomes for different defined-contribution (DC) pension plan members distinguished by occupation and gender. While 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 salaries), 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 median pension difference between occupations is 34 per cent (for men) and 38 per cent (for women), while the largest median pension difference between women and men in the same occupation is 45 per cent (for the same contribution rate). We conclude that key aspects of plan design (in particular contribution rates) should be occupation- and gender-specific.