Hostname: page-component-77c89778f8-sh8wx Total loading time: 0 Render date: 2024-07-19T00:39:19.576Z Has data issue: false hasContentIssue false

Behind the success of dominated personal pension plans: sales force and financial literacy factors

Published online by Cambridge University Press:  12 November 2019

Giuseppe Marotta*
Affiliation:
Economics Department, University of Modena and Reggio Emilia, viale Berengario 51, Modena, 41121, Italy
*
*Corresponding author. Email: giuseppe.marotta@unimore.it

Abstract

The revealed preference for dominated insurance-based personal pension plans (PPPs) in Italy is a decade-long puzzle. I surmise that a motivation from the supply side is a sales force factor deriving from the geographical distribution of financial providers, including the countrywide network of the state controlled Post Office. I provide supporting evidence using three biennial waves of the Bank of Italy's survey on household finances from 2010 to 2014. The time interval includes a public pension system reform sharply raising the statutory age retirement, legislated in December 2011 to defuse a sovereign debt crisis. I show that the salience effect on the awareness of the benefits of supplementing lower perspective public pensions with PPPs increased the explanatory power of financial strength indicators. Exploiting a module in the 2010 wave I estimate a surprising decrease in the probability of subscription to PPPs in 2014 associated with the indicator for the highest financial literacy level.

Type
Article
Copyright
Copyright © Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anagol, S, Cole, S and Sarkar, S (2012) Understanding the advice of commissions-motivated agents: evidence from the Indian life insurance market. Harvard Business School Working Papers 12-055.Google Scholar
Argyle, B, Nadauld, T and Palmer, C (2017) Real effects of search frictions in consumer credit markets. MIT Sloan Working Paper No. 5242–17.CrossRefGoogle Scholar
Baffigi, A, Cannari, L and D'Alessio, G (2016) Cinquant'anni di indagini sui bilanci delle famiglie italiane: storia, metodi, prospettive. Banca d'Italia, Questioni di Economia e Finanza No. 368.Google Scholar
Banca d'Italia (2012) I bilanci delle famiglie italiane nell'anno 2010. Supplementi al Bollettino Statistico, Nuova Serie, XXII (6).Google Scholar
Banca d'Italia (2014) I bilanci delle famiglie italiane nell'anno 2012. Supplementi al Bollettino Statistico, Nuova Serie, XXIV (5).Google Scholar
Banca d'Italia (2015) I bilanci delle famiglie italiane nell'anno 2014. Supplementi al Bollettino Statistico, Nuova Serie, XXV (64).Google Scholar
Bucher-Koenen, T, Hackethal, A, Koenen, J and Laudenbach, C (2019) Do seemingly smarter people get better advice? Available at https://ssrn.com/abstract=2572961.Google Scholar
Calcagno, R and Monticone, C (2015) Financial literacy and the demand for financial advice. Journal of Banking and Finance 50, 363380.CrossRefGoogle Scholar
Campbell, JY (2006) Household finance. Journal of Finance 61, 15531604.CrossRefGoogle Scholar
Cappelletti, G and Guazzarotti, G (2010) Retirement Savings in the Survey on Household Income and Wealth. Bank of Italy Occasional Paper No. 77.CrossRefGoogle Scholar
Cappelletti, G, Guazzarotti, G and Tommasino, P (2011) What Determines Annuity Demand at Retirement? Bank of Italy Temi di Discussione (Working Paper) No. 805.Google Scholar
COVIP (various years) Relazione Annuale.Google Scholar
Disney, R, Gatherhood, J and Weber, J (2015) Credit counselling: a substitute for consumer financial literacy? Journal of Pension Economics and Finance 14, 466491.CrossRefGoogle Scholar
European Commission (2018) Distribution systems of retail investment products across the European Union. Available at https://ec.europa.eu/info/sites/info/files/180425-retail-investment-products-distribution-systems_en.pdf.Google Scholar
Foà, G, Gambacorta, L, Guiso, L and Mistrulli, PE (2015) The supply side of household finance. CEPR Discussion Paper No. 10714.Google Scholar
Fornero, E and Monticone, C (2011 a) Financial literacy and pension plan participation in Italy. Journal of Pension Economics and Finance 10, 547564.CrossRefGoogle Scholar
Fornero, E and Monticone, C (2011 b) Financial literacy and pension plan participation in Italy. Netspar Discussion Paper 01/2011–019.CrossRefGoogle Scholar
Guiso, L and Sodini, P (2013) Household finance: an emerging field. In Constantinides, GM, Harris, M and Stulz, RM (eds), Handbook of the Economics of Finance. Amsterdam: Elsevier, 2, Part B, pp. 13971532.Google Scholar
Gurun, UG, Matvos, G and Seru, A (2016) Advertising expensive mortgages. Journal of Finance LXXI, 23712416.CrossRefGoogle Scholar
Hackethal, A, Haliassos, M and Jappelli, T (2012) Financial advisors: a case of babysitters? Journal of Banking and Finance 36, 509524.CrossRefGoogle Scholar
Han, T and Stańko, D (2018) 2018 Update on IOPS work on fees and charges. IOPS Working Papers on Effective Pensions Supervision, No. 32.Google Scholar
Hastings, JS, Madrian, BC and Skimmyhorn, WL (2013) Financial literacy, financial education, and economic outcomes. Annual Review of Economics, Annual Reviews 5, 347373.CrossRefGoogle ScholarPubMed
Hastings, JS, Madrian, BC and Skimmyhorn, WL (2017) Sales force and competition in financial product markets: the case of Mexico's social security privatization. Econometrica 85, 17231761.CrossRefGoogle Scholar
Hung, AA, Parker, AM and Yoong, J (2009) Defining and Measuring Financial Literacy. Rand Corporation, WR-708.CrossRefGoogle Scholar
Iscenko, Z (2018) Choices of dominated mortgage products by UK consumers. Financial Conduct Authority Occasional Paper No. 33.Google Scholar
Itinerari Previdenziali (2018) Quinto Report annuale – ‘Investitori istituzionali italiani: iscritti, risorse e gestori per l'anno 2017’.Google Scholar
Jappelli, T and Padula, M (2015) Investment in financial literacy, social security, and portfolio choice. Journal of Pension Economics and Finance 14, 369411.CrossRefGoogle Scholar
Klapper, L, Lusardi, A and van Oudheusden, P (2016) Financial literacy around the world: insights from the standard & poor's ratings services Global Financial Literacy Survey. Available at http://gflec.org/wp-content/uploads/2015/11/Finlit_paper_16_F2_singles.pdf.Google Scholar
Luciano, E, Rossi, MC and Sansone, D (2016) Financial inclusion and life insurance demand: evidence from Italian households. CERP Working Paper 156/16.Google Scholar
Lusardi, A (2015) Risk literacy. Italian Economic Journal 1, 523.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2011 a) Financial literacy and planning: Implications for retirement wellbeing. In Mitchell, O. S. and Lusardi, A. (eds), Financial Literacy: Implications for Retirement Security and the Financial Marketplace. Oxford: Oxford University Press, pp. 1739.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2011 b) Financial literacy around the world: an overview. Journal of Pension Economics and Finance 10, 497508.CrossRefGoogle ScholarPubMed
Lusardi, A and Mitchell, OS (2014) The economic importance of financial literacy: theory and evidence. Journal of Economic Literature 52, 544.CrossRefGoogle ScholarPubMed
Mullainathan, S, Noeth, M and Schoar, A (2012) The market for financial advice: an audit study. NBER Working Paper, No. 17929.CrossRefGoogle Scholar
Nolan, A and Doorley, K (2019) Financial literacy and preparation for retirement. IZA DP No. 12187.Google Scholar
OECD (2016) Pension Outlook 2016. Paris: OECD Publishing.Google Scholar
OECD (2017) Pensions at a Glance 2017: OECD and G20 Indicators. Paris: OECD Publishing.Google Scholar
Poste Italiane (various years) Relazione finanziaria annuale. Available at https://www.posteitaliane.it/it/bilanci-e-relazioni.html #/.Google Scholar
Ricci, O and Caratelli, M (2017) Financial literacy, trust and retirement planning. Journal of Pension Economics and Finance 16, 4364.CrossRefGoogle Scholar
SHIW (various years) see Banca d'Italia.Google Scholar
Supplementary material: File

Marotta supplementary material

Online Appendix

Download Marotta supplementary material(File)
File 33 KB