City Research Online

Abstract

The growth of defined contribution pensions, in which retirement depends on individual savings and financial market investments, has been a key aspect of household financialisation. This paper examines the impact of the shift from defined benefit to defined contribution pensions on workplace pension wealth inequality in Britain. We propose a conceptual framework to interpret the effect of this shift, highlighting four key channels through which defined contribution pensions can aggravate pension wealth inequality: the greater inequality of pension contributions, lack of redistributive mechanisms within pension schemes, the compounding effects of (missed) contributions over time, and unequal capacity to take on risks. Using data from the UK Wealth and Assets Survey, along with quantile regression and decomposition analysis, we find corroborating evidence that reliance on defined contribution pensions exacerbates workplace pension wealth inequality, supporting the plausibility of our proposed four channels.

Publication Type:	Article
Additional Information:	This is a pre-copyedited, author-produced version of an article accepted for publication in Socio-Economic Review following peer review. The version of record will be available online at: https://doi.org/10.1093/ser/mwaf068
Publisher Keywords:	Pensions, Financialisation, Wealth inequality, Quantile regressions
Subjects:	H Social Sciences > HG Finance
Departments:	School of Policy & Global Affairs School of Policy & Global Affairs > Department of International Politics
SWORD Depositor:	Symplectic Administrator

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