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Better-informed Workers and Retirement Savings Decisions: Impact Evaluation of a Personalized Pension Projection

Listed author(s):
  • Eduardo Fajnzylber
  • Gonzalo Plaza
  • Gonzalo Reyes


    (Studies Division, Chilean Pension Supervisor)

In a defined contribution pension system based on individual accounts information is essential, as plan members are responsible for taking actions in order to avoid undesirable low levels of pension income during retirement. In this paper we use a unique natural experiment to analyze the impact of information on savings decisions. In 2005, Pension Fund Administrators started sending out a Personalized Pension Projection (PPP). The first sending included only individuals who contributed in a particular quarter of the year and some of them did not receive the statements due to problems with the accuracy of their current address. We use matching estimation techniques exploiting these sources of variation during the first year to identify the impact of information on savings decisions. Our results show that the new information provided caused an increase in the probability of making voluntary contributions for old age, of approximately 1.4 percentage points, for individuals in the 40-50 age group. The effect on a younger group was smaller, consistent with myopia or liquidity constraints explanations for the commonly observed fact that pension concerns only arise once individuals approach retirement age. The impact on women is significantly larger than that on men, potentially reflecting a higher sense of urgency. As expected, individuals exposed to a positive tax benefit when making voluntary contributions exhibit a significantly larger impact than tax exempt individuals. Contrary to what we expected, however, individuals with high projected replacement rate present a slightly higher impact than those with lower replacement rate. Overall, these results suggest that a simple improvement in the information provided in the pension system may have important effects on retirement decisions made by individuals..

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File Function: Revised version, 2009
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Paper provided by Superintendencia de Pensiones in its series Working Papers with number 31.

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Date of creation: Sep 2009
Date of revision: Sep 2009
Handle: RePEc:sdp:sdpwps:31
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  1. Solange Berstein & Andrea Tokman, 2005. "Brechas de ingreso entre géneros: ¿Perpetuadas o exacerbadas en la vejez?," Working Papers 8, Superintendencia de Pensiones, revised Jul 2005.
  2. Francisco Pino & Solange Berstein & Guillermo Larraín, 2006. "Chilean Pension Reform: Coverage Facts and Policy Alternatives," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 227-279, January.
  3. Sewin Chan & Ann Huff Stevens, 2008. "What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision-Making," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 253-266, May.
  4. Giovanni Mastrobuoni, 2007. "Do better–informed workers make better retirement choices? A test based on the Social Security Statement," Carlo Alberto Notebooks 51, Collegio Carlo Alberto.
  5. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
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