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Are financial retirement incentives more effective if pension knowledge is high?

Published online by Cambridge University Press:  14 December 2017

MATTHIAS GIESECKE  and
GUANZHONG YANG
MATTHIAS GIESECKE
Affiliation:
RWI – Leibniz-Institute for Economic Research, Essen, Germany (e-mail: matthias.giesecke@rwi-essen.de)
GUANZHONG YANG
Affiliation:
University of Duisburg-Essen, Essen, Germany
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Abstract

We study the combined effects of financial incentives and information provision on retirement behavior. To elicit preferences for retirement timing in the laboratory, we ask subjects to make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared with those who only know their pension annuity. Being informed about a forward-looking measure of pension benefits makes the financial consequences of retirement choices more salient to the decision maker.

Keywords

C91H55J26Retirement agefinancial incentivesinformation treatmentpension knowledgefinancial literacy
Type
Article
Information
Journal of Pension Economics & Finance , Volume 17 , Special Issue 3: Advances in Understanding Pension Decisions , July 2018 , pp. 278 - 315
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

We are grateful to Jeannette Brosig-Koch, Colin Green, Timo Heinrich, Christoph Helbach, Reinhold Schnabel, and numerous seminar participants for helpful discussions and suggestions. The editor Michael Haliassos and the referees provided valuable comments that helped to improve the paper. Special thanks to Thomas Bauer and Wim Kösters for supporting the recruitment of older workers. Fernanda Martinez Flores and Anja Rösner provided excellent research assistance. Financial support from the German Research Foundation (DFG) is gratefully acknowledged (SCHN553/1-1).

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