A Fistful of Dollars: Financial Incentives, Peer Information, and Retirement Savings

Abstract

To understand what motivates individuals to look at their pension situation and make adequate savings decisions, we conduct two field experiments with 226,946 and 257,433 pension fund participants. We find peer-information statements do not increase the rate at which individuals check their pension information, but lottery-type financial incentives do. Offering a few large prizes rather than many small prizes is most effective. However, the uptake of pension information does not lead to improved pension knowledge nor to increased self-reported savings three weeks after our intervention.

Disparities in Financial Literacy, Pension Planning, and Saving Behavior

“…Recent studies have provided some evidence. Bauer et al (2021) document that financial incentives may be an effective tool to increase look-up rates of pension information. However, the authors also show that this increased attention is not accompanied by an increase in pension knowledge or higher savings rates.…”

Explaining consumers' progress through life insurance decision states: The role of personal values and consumer characteristics

“…We build on studies of consumer tendency to search for, and adopt, new financial products (Hoffmann & Broekhuizen, 2010; Steenkamp et al, 1999) using the DSM, which systematizes a consumers' progress through the stages of pre‐awareness to capable choice (Bateman et al, 2014; Bauer et al, 2022). The DSM represents the progress of consumers in life insurance product literacy (Pappalardo, 2012).…”

“…This raises questions relating to what types of consumers are more at risk of poor life insurance decisions and why, and what interventions providers, regulators and consumer advocates can make to better protect consumers. We build on studies of consumer tendency to search for, and adopt, new financial products (Hoffmann & Broekhuizen, 2010;Steenkamp et al, 1999) using the DSM, which systematizes a consumers' progress through the stages of pre-awareness to capable choice (Bateman et al, 2014;Bauer et al, 2022). The DSM represents the progress of consumers in life insurance product literacy (Pappalardo, 2012).…”

“…Firstly, we propose a model of insurance purchase that classifies consumers by the stages of their purchase decision journey, from being pre‐aware of life insurance to being capable of a choice. Previous studies of financial decisions label this the “Decision States Model (DSM)” (Bateman et al, 2014; Bauer et al, 2022). The DSM adapts the concept of a consumer funnel.…”

Conform to the norm. Peer information and sustainable investments

“…People derive negative utility from acting against social norms (Levitt & List, 2007). As a result, researchers have explored to what extent peer information can be used to alter financial behavior such as retirement saving (Lieber & Skimmyhorn, 2018;Duflo & Saez, 2002, 2003Beshears et al, 2015;Bauer, Eberhardt, & Smeets, 2022) as well as non-financial behavior such as energy conservation (Schultz, Nolan, Cialdini, Goldstein, & Griskevicius, 2007;Allcott, 2011;Costa & Kahn, 2013), offsetting the CO2 emissions of a flight (Bernard, Tzamourani, & Weber, 2022), the provision of useful reviews to retailers (Burtch, Hong, Bapna, & Griskevicius, 2018), and political voting (Gerber & Rogers, 2009). We show that disclosing related others' tendencies to invest sustainably as well as peers' beliefs about the impact and return of sustainable investments during an investment decision increase retail investors' likelihood to invest more sustainably themselves.…”