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DB pensions better for well-being – researchers

US – Defined benefit pension schemes are better for people’s well-being than “more risky” defined contribution schemes, researchers in the US say.

“It is interesting to note that having a defined benefit plan that provides a lifetime annuity has a positive impact on the well-being of retirees, compared to having no pension or even just a defined contribution plan,” the researchers said.

They pointed out that “retirees with relatively risky defined contribution pensions may have lower well-being compared to those with relatively low-risk defined benefit plans, although satisfaction should still be higher than those with no pension”.

“Understanding the factors that determine wellbeing of retirees is an important economic and policy topic,” wrote Keith Bender and Natalia Jivan in a paper for the Center for Retirement Research at Boston College.

They said that there were also other factors which have a more important effect on well-being.

“The first is the reason for retirement. If individuals say that they voluntarily retired, they express much higher levels of well-being compared to those who did not voluntarily retire.”

“The second major factor is health,” they added. “Unsurprisingly, those with poor health also experience dramatically lower levels of well-being.

“Although neither of these factors is controllable from a policy point of view, they do indicate areas where more research could be done to help assure higher levels of well-being for retirees.”

Bender is an assistant professor in the Department of Economics and Graduate Program in Human Resources and Labor Relations at the University of Wisconsin-Milwaukee. Jivan is a graduate research assistant at the Center for Retirement Research.

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