The impact of automatic enrolment on the mental health gap in pension participation: Evidence from the UK

https://doi.org/10.1016/j.jhealeco.2022.102673Get rights and content
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Abstract

A large body of evidence shows that individuals with poor mental health have lower income over the lifespan but a dearth of evidence exists on how poor mental health affects savings behaviour. In this paper, we provide novel evidence of a mental health gap in pension participation in the UK using nationally representative longitudinal data from Understanding Society (UKHLS). Beginning in 2012, the UK government introduced automatic enrolment enabling us to assess the impact of one of the largest pension policy reforms in the world on this mental health gap. We measure mental health using the General Health Questionnaire (GHQ-12) which is a commonly used tool for measuring psychological distress. Prior to automatic enrolment, we find that male private sector employees with poor mental health are 3.7 percentage points less likely to participate in a workplace pension scheme while female private sector employees with poor mental health are 2.9 percentage points less likely to participate after controlling for key observables including age, education, race, marital status, number of children, occupation type, industry type, presence of a physical health condition and cognitive ability. The implementation of automatic enrolment removes the mental health gap in pension participation, equalising the pension participation rates of individuals with and without poor mental health in the private sector.

Keywords

Mental health
Psychological distress
Pensions
Savings
Automatic enrolment
Financial security
Longitudinal studies

JEL codes

J32
D91
G41

Cited by (0)

Understanding Society, which is the source of the data used here, is an initiative funded by the Economic and Social Research Council and various Government Departments, with scientific leadership by the Institute for Social and Economic Research, University of Essex, and survey delivery by NatCen Social Research and Kantar Public. The research data are distributed by the UK Data Service. Neither the original collectors of the data nor the archive bears any responsibility for the analyses or interpretations presented here.