Scandinavian Working Papers in Economics
Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy
No 2020:24: Who lacks pension knowledge, why and does it matter?
Mikael Elinder (), Johannes Hagen (), Mattias Nordin () and Jenny Säve-Söderbergh ()
Additional contact information
Mikael Elinder: Department of Economics at Uppsala University, Postal: Uppsala University, Department of Economics
Johannes Hagen: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: Institute for Evaluation of Labour Market and Education Policy, P O Box 513, SE-751 20 Uppsala, Sweden
Mattias Nordin: Uppsala University, Department of Statistics, Postal: Department of Statistics, Uppsala University
Jenny Säve-Söderbergh: The Swedish Social Insurance Inspectorate, Postal: The Swedish Social Insurance Inspectorate (Inspektionen för socialförsäkringen, ISF)
Abstract: Recent pension reforms have shifted a larger responsibility towards savers. Individuals therefore need better knowledge of the rules and incentives embedded in the pension system to adequately save and prepare for retirement. In this paper, we use a novel Swedish survey matched with high-quality administrative data to show that many lack, and feel that they lack, such pension-specific knowledge. We also show that the most economically vulnerable groups know the least. Linking pension knowledge to behavior, we find that knowing less is associated with lower preparedness for retirement, even after controlling for financial literacy and subjective knowledge. Moreover, a large majority state the complexity of the pension system, or that they have planned to learn more about pensions but that it just hasn’t happened, as reasons for why they do not have sufficient knowledge. That the complexity of the pension system and individuals’ proclivity to procrastinate are plausible causal factors for low pension knowledge is supported by analyses showing that individuals with low math skills and procrastination tendencies have lower pension knowledge.
Keywords: bounded rationality; financial literacy; saving; pension system
45 pages, December 15, 2020
Full text files
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