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DB or not DB-the Choice of Pension Plan Provision by Employers

Paul Sweeting

The literature into employee choice in relation to DB and DC pension schemes is substantial; however, there has been little work carried out on the factors influencing the choice of scheme offered from a firm’s point of view. In particular, analysis has not been carried out on the types of firm for which DC provision might be more likely. I this paper, I seek to address this issue by looking at the characteristics of UK firms offering and failing to offer DB pension schemes. I carry out univariate and multivariate analysis on an unbalanced panel and also on an aggregated cross-sectional data set. I find strong evidence that "value" firms are more likely than "growth" firms to offer a DB pension scheme, suggesting that the lower cost of a DC pension scheme is more attractive than the financial opacity of a DB pension scheme to a "growth" firm. Weaker evidence is also found for differences in a number of other variables.