ABSTRACT
Many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement. Identifying at-risk groups with tendencies of not joining pension plans will help governments target strategies to improve pension awareness and participation. This study investigates the role of personality traits in pension decision making using data from the UK Household Longitudinal Study. Our results demonstrate that Extraversion significantly correlates with non-participation in private pensions, including both employer run and personal pensions. Individuals who are high in Conscientiousness are more likely to participate and pay more into personal pensions. Openness to experience is negatively correlated with saving via personal pensions. Agreeableness and Extraversion correlate inversely with the amount contributed to personal plans. This paper discusses our findings in detail and offers policy implications which may help promote pension participation and ease the problem of old age poverty.
Data availability statement
Raw data are available at UK data archive (http://www.data-archive.ac.uk/). Derived data supporting the findings of this study are available from the corresponding author on request.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 No consensus arose from previous studies regarding the correlations between personality traits and economic preferences (Almlund, et al. Citation2011). While Rustichini et al. (Citation2016) find significant links between personality variables and preferences, others argue that personality traits and preferences play complementary roles in explaining heterogeneity in life outcomes (Becker et al. Citation2012). Note that the purpose of this paper is not to compare the respective effect of personality traits and preferences on economic behaviour. We agree that a deeper understanding of the complex connections between personality traits and economic decision making is needed (Rustichini et al. Citation2016) and future research should systematically integrate psychology into behavioural economics to form comprehensive models (Hodgson, Citationforthcoming).
2 In the UK, men currently reach state pension age at 65. For women, the state pension age will rise to 65 in November 2018.