New EBRI Research: Pension Payments Track Employment Compensation Patterns

1/15/2003

From: Jim Jaffe, 202-775-6353; e-mail: jaffe@ebri.org or Ken McDonnell, 202-775-634256; e-mail: mcdonnell@ebri.org, both of EBRI

WASHINGTON, Jan. 15 -- The groups that generally win the best compensation in the workplace also received the most generous annuity payments between 1988 and 2001, an Employee Benefit Research Institute (EBRI) analysis of government data shows. The largest payments went to married men and those with the longest period of formal education.

When analyzed by income levels, annual pension and annuity income for the lowest- and highest-income quintiles rose significantly (by nearly 50 percent and 16 percent, respectively) over the period. Income for the fourth quintile rose by a modest $352 to $14,400. But income received by those in the middle quintile declined by 17 percent.

When stratified by gender, race, martial level or educational background, the data indicate that pension income rose. The analysis includes income coming from employment-based pension plans (defined benefit and defined contribution plans, including 401(k) plans sponsored by both private- and public-sector employers), whether received in the individual's own name or as a survivor, and individual retirement accounts (IRAs). All of the numbers are adjusted for inflation and given in constant 2001 dollars.

The January issue of EBRI Notes discusses trends in pension payments. Some highlights:

-- In each subgroup, less than half of the population receives a pension payment. The highest level of recipiency is 47.7 percent for men 76(80 years old. Among those over age 65, 44.7 percent of men and 27.6 percent of women received such payments in 2001. -- The median annual payment for those older than age 65 was $8,136 in 2001. Younger recipients generally received higher payments. -- While receipt of pension income generally correlates with income, the relationship is not constant. A significantly higher percentage (34.8 percent) of those in the middle income quintile received pension and annuity income, compared with those in the top income quintile (21.2 percent)

"This verifies the historic patterns we've seen when it comes to people who receive pension and annuity income," said EBRI President and CEO Dallas Salisbury. "Among the minority with have this type of income, higher payments generally go to men, to upper-income individuals, and those who have more education."

EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, DC (www.ebri.org). Founded in 1978, its mission is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI does not lobby and does not take positions on legislative proposals. EBRI receives funding from individuals, employers of all types, unions, foundations, and government.