The role of subjective well-being in workplace pension contributions: evidence from the UK household longitudinal study (understanding society)

Abstract

As more countries worldwide grapple with the twin challenges of rising life expectancy and ageing populations, ensuring sufficient retirement preparedness has become increasingly paramount. One approach is to encourage pension contributions. Here, understanding the factors influencing these contributions is critical for policymakers looking to devise strategies targeted at improving retirement readiness. Our study contributes to this field by examining the role of subjective well being (i.e., cognitive and affective well-being) in workplace pension contributions within the United Kingdom (UK). Specifically, we used Waves 2, 4, 6, 8, 10, and 12 of the UK Household Longitudinal Study (Understanding Society) dataset. To facilitate our analysis, we employed life satisfaction and mental distress as measures for cognitive and affective well-being respectively. We also used self-reported percentages of salary contributed to workplace pensions to measure pension contributions. Our initial results showed no statistically significant relationship between subjective well-being and workplace pension contributions. However, after incorporating lagged variables and accounting for attrition effects using a balanced panel separately, we then observed a statistically significant link between life satisfaction and workplace pension contributions. On the contrary, mental distress had no significant association with workplace pension contributions, though we found a statistically significant interaction effect between mental distress and gender. Overall, our results are two-fold: Firstly, life satisfaction is contemporaneously and dynamically linked with workplace pension contributions. Secondly, the association between mental distress and workplace pension contributions appears to be mediated by gender. This paper will discuss our findings extensively and offer policy and research implications.