Rentencockpit/Pensions Dashboard - Promoting Individual Pension Transparency

Topic and Objectives

Only one in four German households has a plan for retirement and planning is significantly higher among individuals with high financial literacy (Bucher-Koenen and Lusardi 2011). Studying instruments for lowering information costs such as FinTech Apps, and Pensions Dashboards is thus especially relevant in this context. Extant theory predicts that it is usually individuals with low financial literacy and little interest in personal finance that should benefit the most from such instruments because it reduces information acquisition through greater convenience and transparency. For our field study, which launched in January 2017, we offered participants an app-based overview of their future pension claims from state, occupational, and private pension contracts (digital pension dashboard). We randomize different information treatments among dashboard users. Two partnering banks helped us attract more than 12,000 of their clients as participants, which all participated in an initial survey on pension planning. Participants belonged to one of four treatment groups or one of two control groups. The banks also provide us with account balance and transaction data for all participants before and after the treatment period that we combine with the survey data and the dashboard data. The richness of the data permits us to test many of the main predictions of the state-of-the-art literature on individual pension planning and information processing (e.g., rational inattention). We focus on Matӗjka and McKay (2014) who propose a discrete-choice variant of the rational inattention approach.

Key Findings

• Financial literacy affects wealth accumulation, and pension planning plays a key role in this relationship. In a large field experiment, we employ a digital pension aggregation tool to confront a treatment group with a simplified overview of their current pension claims across all pillars of the pension system.
• We combine survey and administrative bank data to measure the effects on actual saving behavior. Access to the tool decreases pension uncertainty for treated individuals.
• Average savings increase - especially for the financially less literate.
• We conclude that simplification of pension information can potentially reduce disparities in pension planning and savings behavior.         

Policy Implications

• simplification of pension information by means of the FinTech App can reduce disparities in pension planning and savings behavior