Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection

Goda, Gopi Shah; Manchester, Colleen Flaherty

doi:10.3368/jhr.48.1.198

Cited by 29 publications

(28 citation statements)

References 35 publications

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“…Other researchers have shown that poorly designed defaults can reduce welfare if employees fail to later adjust the defaults to suit their needs (Choi et al 2002(Choi et al , 2004a(Choi et al , 2004bBeshears et al 2008Beshears et al , 2010a and that optimal defaults can vary depending upon participant characteristics (Carroll et al 2009;Carlin, Gervais, and Manso 2010;Goda and Manchester 2010). Our results also suggest reasons to be cautious in relying solely on defaults to influence behavior.…”

Section: Introductionmentioning

confidence: 47%

Decision-Making Approaches and the Propensity to Default: Evidence and Implications

Brown

Farrell

Weisbenner

2015

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This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals' decision-making approaches as well as their economic and demographic characteristics. Using a survey of plan participants, we find that procrastination and the need for cognitive closure are important determinants of the likelihood of default. We also explore an important implication of defaulting -individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.

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Section: Introductionmentioning

confidence: 47%

Decision-Making Approaches and the Propensity to Default: Evidence and Implications

Brown

Farrell

Weisbenner

2015

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“…They may be cognitively constrained, as evidenced by low rates of financial literacy (Lusardi and Mitchell, 2007). Many are affected by behavioral factors outside of standard models, such as procrastination or inertia (e.g., Thaler and Benartzi, 2004;Choi et al, 2004), default rules (e.g., Madrian and Shea, 2001;Beshears et al, 2009;Mitchell et al, 2009;Goda and Manchester, 2013), peers (e.g., Saez, 2002, 2003;Beshears et al, 2011), and how information is conveyed or framed (Bernheim et al, 2011;Choi et al, 2012).…”

Section: Introductionmentioning

confidence: 97%

What will my account really be worth? Experimental evidence on how retirement income projections affect saving

Goda

Manchester

Sojourner

2014

Journal of Public Economics

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163

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“…Thaler and Benartzi (2004) find that, even when individuals have to choose to be part of a savings scheme, the default of 'automatically escalating' contributions leads to much higher rates of savings. Goda and Manchester (2013) show that, in a firm where the default pension scheme changes from being a defined contribution to a defined benefit (DB) pension scheme at age 45, the proportion enrolled in the DC scheme falls by 60 percentage points. On the other hand, Bronchetti et al (2013) study a randomised experiment where 10% of a tax refund is defaulted into a savings bond and find little evidence of any effect on total savings.…”

Section: Introductionmentioning

confidence: 99%

What happens when employers are obliged to nudge? Automatic enrolment and pension saving in the UK

Cribb¹,

Emmerson²

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper studies the first nationwide introduction of automatic enrolment, in which employers in the United Kingdom are obliged to enrol employees into a workplace pension scheme, which employees can then choose to leave if they wish. We exploit the phased rollout of automatic enrolment since 2012 to estimate its effect on pension saving. As a result of automatic enrolment, participation in workplace pensions among eligible private sector workers is estimated to have increased by 37 percentage points, and workplace pension membership reached 88% amongst those affected by April 2015. Automatic enrolment significantly increased the average pension contribution rate, in part because some newlyenrolled employees received an employer contribution well above the minimum mandated by the government. Furthermore, many employees who did not have to be automatically enrolled were nonetheless brought into a workplace pension scheme as a result of the policy. We find no evidence of employers reducing employer contributions for newly-hired employees or existing members of workplace pensions.

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Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection

Cited by 29 publications

References 35 publications

Decision-Making Approaches and the Propensity to Default: Evidence and Implications

Decision-Making Approaches and the Propensity to Default: Evidence and Implications

What will my account really be worth? Experimental evidence on how retirement income projections affect saving

What happens when employers are obliged to nudge? Automatic enrolment and pension saving in the UK

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