Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance

Choi, James J.; Laibson, David; Madrian, Brigitte C.; Metrick, Andrew

doi:10.3386/w8655

Cited by 248 publications

(321 citation statements)

References 20 publications

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“…In many cases, these firms have introduced automatic enrolment to comply with the Internal Revenue Service's non-discrimination rules 2 (see Choi et al (2002) and Butrica and Karamcheva (2015)). …”

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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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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“…Suggestions to increase savings Individuals have been described as exhibiting irrationality and a severe lack of self-control, as refl ected in their fi nancial decisions, such as saving for retirement. 5,32 -34 This circumstance is extremely evident in Choi et al ' s report 35 in which he found that in a subsequent 4-month review, a massive 86 per cent of employees with the intention to increase their saving failed to do so. Therefore, it highlighted the lack of willpower to save more.…”

Section: Knowledge About Retirement Planningmentioning

confidence: 90%

“…Of the respondents saving too little, 15 per cent stated that they plan to increase their savings in the future. Choi et al 35 found that individuals severely lacked the willpower to follow through on their intentions to save more. Furthermore, only a trivial portion (1.4 per cent) indicated distrust towards pensions.…”

Section: Yes or Nomentioning

confidence: 99%

Attitudes, savings choices, level of knowledge and investment preferences of employees toward pensions and retirement planning: Survey evidence from Barbados

Millar¹,

Devonish²

2009

Pensions Int J

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This study draws on data from an online survey of a cross-section of Barbadian employees who are members of either defi ned benefi t or defi ned contribution schemes. The results were heavily consistent with those from the United Kingdom. Generally, employees lack the basic knowledge to manage their own pension plans and they often times treat issues pertaining to retirement with low priority. Furthermore, results show that an extremely high weighting is attributed to property and land as assets for retirement. One major fi nding that came out of the study was that there are cultural differences between the United Kingdom and Barbados, where in the United Kingdom there is an individualistic culture, in contrast to the collectivist culture of Barbados.

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“…Several papers (surveyed in Poterba et al, 1996) found that these plans tend to increase savings among plan 9 See Laibson et al (1998). 10 See Madrian and Shea (2001), Choi et al (2001Choi et al ( , 2004a. 11 In a previous draft of this paper, we also utilized data from the 2008 wave of the SIPP.…”

Section: Related Literaturementioning

confidence: 99%

The impact of participation in employment-based retirement savings plans on material hardship

Heim¹,

Ramnath

2015

Journal of Pension Economics and Finance

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To contribute to a retirement plan (barring an increase in income), an individual must either reduce consumption or increase debt. Using data from the 2004 wave of the Survey of Income and Program Participation, we examine the extent to which contributing to 401(k)-type accounts leads to an increase in short-term financial difficulties, particularly among low-income individuals. After instrumenting for plan take-up, we find that contributing to a 401(k) plan appears to have a small positive impact on the presence of any material hardship and debt holding among the lowest income quintiles, though that effect diminishes further up the income distribution.JEL CODES: J32, E21, H31

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Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance

Cited by 248 publications

References 20 publications

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

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

Attitudes, savings choices, level of knowledge and investment preferences of employees toward pensions and retirement planning: Survey evidence from Barbados

The impact of participation in employment-based retirement savings plans on material hardship

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