Is Information Overrated? Evidence from the Pension Domain

Abstract

This paper presents empirical evidence from the Netherlands indicating that the current policy based on information is unlikely to help people make the pension choices required in a system in which employees are the ultimate bearers of asset market risk. This holds even if information is made easier to understand, disseminated by the relevant media, and provided made to measure. The paper offers a behavioral explanation of the findings and concludes that policy makers, financial supervisors, and the pension industry should adopt alternative instruments for helping employees make good choices. These strategies may be useful in the context of recent proposals for a structural change of the pension system, including the increase in the eligibility age for the first layer pension (AOW).

Does pension information impact savings?

“…Free, customized information sent to the home allows the less educated and financially distressed consumers (as described by Kim and Kim, 2010) to be targeted. However, Prast, Teppa and Smits (2012) were quite critical about the effectiveness of measures to deliver pension information and underscore that this information is not sufficient to encourage individuals to make appropriate choices. It might be useful to provide clear information, but assistance to interpret it could be necessary if individuals are not able to make effective use of it.…”

Keuzemogelijkheden binnen en tussen pensioenregelingen: niet voor elk wat wils

“…Hogere inkomens en hoger opgeleide respondenten zijn meer geneigd een keuze te maken. Lagere inkomens ondernemen minder actie ( Van Rooij e.a., 2007;Prast, Teppa & Smits, 2012). 4 Bovendien, fouten op financieel gebied raken de lagere inkomensgroepen meer dan de hogere inkomensgroepen.…”

Pension Profile Preferences: The Influence of Trust and Expected Expenses

“…Yet, the empirical literature shows limited effects of increasing workers' knowledge on retirement planning, see e.g. Mastrobuoni (2011) or Prast et al (2012). law.…”