Work now, pay later? An empirical analysis of the pension–pay trade off

Abstract

We employ random effects panel data regression methodology to investigate the potential compensating differential between wages and pensions. Using data from the British Household Panel Survey (BHPS) and derived prospective pension variables as calculated by the Institute for Fiscal Studies (IFS), we find no evidence of a trade off and, indeed, some evidence of a small premium. Further analysis finds no significant differences in the results for public and private sector workers, even after controlling for sample selection bias.