US - In 1992, employer-provided pensions accounted for about 20% of the total wealth of middle-income households aged 51-61, second only to Social Security, according to new research by the Centre for Retirement Research at Boston College.
However, many workers still lack pension coverage. After increasing sharply in the post-World War II period, the percentage of the private sector workforce covered by an employer-sponsored pension plan at any given point in time has remained around 50% since the 1970s.
This constancy obscures two major changes, according to a paper, ‘How Important Are Private Pensions?’, by Alicia Munnell, Annika Sundén and Elizabeth Lidstone of the Centre for Retirement Research at Boston College.
First, pension coverage has increased for women and declined for men, primarily reflecting the increased earnings and labor force participation of women and a decline for men in union membership and employment in large manufacturing firms.
Second, a major shift has occurred in the types of plans from defined benefit to defined contribution.
The shift to defined contribution plans reflects employment trends as well as conversion of plans. Whereas only about half the workforce is covered at a given point, pension coverage is more extensive when considered over workers' lifetimes and on a household basis. In addition,the length of time workers must be employed tobecome eligible for benefits - known as the vesting period - has declined,meaning that more plan participants are assured of receiving benefits.
By Luke Clancy
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