Occupationa pensions, wages and tenure wage profiles

Using data from the BHPS, we estimate the impact of occupational pensions on wages and on the tenure profile of wages of male private sector workers in the UK. According to the theoretical literature, occupational pensions participants should receive a premium at the beginning of their careers, when the financial quit disincentives stemming from defined benefit plans are less binding. Our empirical evidence is consistent with this prediction. We find that occupational pension participants earn a positive wage premium only at the beginning of the career. Once we account for the endogenous sorting of individuals into occupational pension schemes, the magnitude of the estimated premium decreases sharply and it looses statistical significance. Indeed, the wage premium appears to be completely explained by unobservable individual and job match heterogeneity