Description of the programme

This is a research paper published by the Journal of Public Economics in the USA. Its aim is to provide evidence about the impact of providing individualised retirement income projections on individuals’ contributions to employer-sponsored retirement accounts. It describes a large-scale field experiment, using administrative data on nearly 17,000 employees at the University of Minnesota, and measuring the causal effect of informational interventions on employee contributions.

The study

• The report provides detailed information on the experimental design, approach to treatment groups, randomisation procedures and empirical methods adopted for the study.
• The study sample consists of all individuals eligible to participate in Voluntary Retirement Plans (VRPs), and under the age of 65 at the start of the experiment, which amounts to 16,881 employees employed by the University in both October 2010 (period 1, prior to intervention) and May 2011 (period 2, following the intervention).
• The age and gender composition of the sample is similar to a nationally-representative sample employed at firms with pension benefits.
• Employees were randomly assigned to four groups, a control group and three treatment groups, to examine the role of different aspects of the intervention.
• Administrative records were supplemented with data collected from a web-based, follow-up survey, which collected self-reported measures of time preferences, barriers to saving, financial literacy, steps in the saving process, beliefs regarding expected retirement income expected rates of return, and expected retirement age.

What are the outcomes?

• The experiment measured the propensity by employees to make any change in contributions to retirement plans as well as the magnitude and direction of change.

Key findings

• The experiment found that providing retirement income projections – an extremely low-cost intervention – can affect individuals' contributions. Sending individuals information about fluctuations at various stages in pensions savings, as well as how to enrol onto a scheme, leads to greater contributions to employer-provided retirement accounts relative to those who received no information.
• The findings also demonstrate the sensitivity of saving behaviour to personal projections: individuals may be susceptible to optimistic assumptions resulting in over-saving or under-saving.
• The intervention boosted annual contributions to employer retirement accounts by $85, equivalent to 3.6 per cent of the average contribution level or 0.15 per cent of average salary, relative to those who received no intervention.
• In addition, randomly-assigned assumptions regarding retirement age, investment returns, and hypothetical contribution amounts were used to generate the projections and were found to have significant impacts on saving behaviour.

Points to consider

• The report states that the study offers the first direct evidence of lifetime income disclosure's potential impact on saving behaviour, though this statement may be USA-specific. This is a detailed report on a study adopting technical statistical analysis which is likely to be of interest to those conducting research rather than a general non-academic audience.

Full report

What will my account really be worth? - full report