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Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment

Author

Listed:
  • John Beshears
  • Matthew Blakstad
  • James J. Choi
  • Christopher Firth
  • John Gathergood
  • David Laibson
  • Richard Notley
  • Jesal D. Sheth
  • Will Sandbrook
  • Neil Stewart

Abstract

Does automatic enrollment into retirement saving increase household debt? We study the randomized roll-out of automatic enrollment pensions to ~160,000 employers in the United Kingdom with 2-29 employees. We find that the additional savings generated through automatic enrollment are partially offset by increases in unsecured debt. Over the first 41 months after enrollment, each additional month increases the average automatically enrolled employee’s pension savings by £32-£38, unsecured debt (such as personal loans and bank overdrafts) by £7, the likelihood of having a mortgage by 0.05 percentage points, and mortgage balances by £118. Automatic enrollment causes loan defaults to fall and credit scores to rise modestly.

Suggested Citation

  • John Beshears & Matthew Blakstad & James J. Choi & Christopher Firth & John Gathergood & David Laibson & Richard Notley & Jesal D. Sheth & Will Sandbrook & Neil Stewart, 2024. "Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment," NBER Working Papers 32100, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32100
    Note: AG PE
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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