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Opt-in or Opt-out? The Power of Defaults in Pension Enrollment Choices

Author

Listed:
  • Tabea Bucher-Koenen
  • Luisa Wallossek
  • Joachim Winter

Abstract

Default settings strongly increase pension enrollment, especially when savings incentives are high and choices are complex. We show that the effect is weaker when incentives are low, options are simple, and opting out is easy. We study the nationwide introduction of auto-enrollment for low-income employees in Germany's public pay-as-you-go pension system. We find that automatic enrollment raises participation by 23 percentage points, though most individuals actively opt out. Linking administrative and survey data shows that the default effect is stronger when enrollment incentives are higher and among individuals who lack knowledge of their enrollment status.

Suggested Citation

  • Tabea Bucher-Koenen & Luisa Wallossek & Joachim Winter, 2026. "Opt-in or Opt-out? The Power of Defaults in Pension Enrollment Choices," CESifo Working Paper Series 12605, CESifo.
    • Handle: RePEc:ces:ceswps:_12605
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    References listed on IDEAS

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    1. Derby, Elena & Mackie, Kathleen & Mortenson, Jacob, 2023. "Worker and spousal responses to automatic enrollment," Journal of Public Economics, Elsevier, vol. 223(C).
    2. Butt, Adam & Donald, M. Scott & Foster, F. Douglas & Thorp, Susan & Warren, Geoffrey J., 2018. "One size fits all? Tailoring retirement plan defaults," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 546-566.
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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