The Value of Choices in the Defined Contribution Pension Scheme
Abstract
The purpose of the thesis is to investigate what affects future pension payouts in the defined contribution pension scheme. We have based our research on data from a Norwegian pension provider and a self-developed survey. Using multilinear regression and descriptive analysis, we have mapped the current trends in the Norwegian defined contribution pension market and investigated the underlying drivers of different factors. Using a self-constructed pension calculator, we have forecasted how factors affect future pension payouts.
The most important demographic characteristics that affect the frequency of active pension choices include gender, age, level of education, and salary. We find that expected payoff and change of risk are the most important reasons motivating active choices. Pension providers, friends and family, and employers are reported to be the main sources of information about pensions.
The most important factors that we find affect pension payouts are investment profile, retirement age, and contribution percentage. To increase awareness of these factors, we propose the further development and distribution of a dynamic pension calculator which will serve as an educational tool for all people with a defined contribution pension scheme. The purpose of the thesis is to investigate what affects future pension payouts in the defined contribution pension scheme. We have based our research on data from a Norwegian pension provider and a self-developed survey. Using multilinear regression and descriptive analysis, we have mapped the current trends in the Norwegian defined contribution pension market and investigated the underlying drivers of different factors. Using a self-constructed pension calculator, we have forecasted how factors affect future pension payouts.
The most important demographic characteristics that affect the frequency of active pension choices include gender, age, level of education, and salary. We find that expected payoff and change of risk are the most important reasons motivating active choices. Pension providers, friends and family, and employers are reported to be the main sources of information about pensions.
The most important factors that we find affect pension payouts are investment profile, retirement age, and contribution percentage. To increase awareness of these factors, we propose the further development and distribution of a dynamic pension calculator which will serve as an educational tool for all people with a defined contribution pension scheme.