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The Impact of Automatic Enrolment on Pension Savings Rates

Funder: University of Stirling (open competition), IMPACT Studentship Scheme
Amount: c. £45,000 (Direct Costs)
Behavioural Science Centre Member: Bernardo Fonseca Nunes
Other Researchers: Professor Liam Delaney

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The goal of this research is to identify how pension saving rates can be increased. Specifically, the analysis seeks to empirically evaluate the effect of automatic enrolment and other related default options on pension coverage and contribution rates. The justification for the analysis is to help inform future decisions over the precise design to be implemented by policymakers. It has been widely documented that when people are asked whether they want to opt in to a retirement plan, the level of participation is far lower than if they are asked whether they want to opt out. Despite the fact that automatic enrolment significantly increases participation, its effect on overall savings rates is less clear, since automatically enrolled individuals could reduce their savings in other forms of investments. Through an interdisciplinary approach, which combines psychological concepts with econometric data analysis, this research programme intends to evaluate automatic enrolment in term of its impact on pension coverage, pension saving, overall saving and level of earnings. Also, the evaluation of whether automatic enrolment enhances the effect of other mechanisms such as matching contributions, simplifications and financial literacy on saving behaviour has particular relevance in terms of public policy.

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