Do Savings Increase in Response to Salient Information About Retirement and Expected Pensions?

How can retirement savings be increased? We explore a unique policy change in the context of the German pension system to study this question. As of 2004, the German pension authority started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected pension payments. This reform did not change the level of pensions, but only manipulated the knowledge about and salience of expected pension payments. Using German tax return data, we exploit two discontinuities in the age cutoffs of receiving such a letter to study their effects on private retirement savings. Our results show that the letters increase private retirement savings. The effects are fairly sizable and persistent over several years. We further show that the letter increases labor earnings, and that the increase in savings partly crowds out charitable donations. Moreover, we present evidence suggesting that both information and salience drive the savings effect. Our paper adds to a recent literature showing that policies that go beyond the traditional neoclassical reasoning can be powerful to increase savings rates.


  • Andreas Peichl - Guest Speaker
    University of Mannheim
    Prof. Dr. Andreas Peichl is head of ZEW’s Research Group "International Distribution and Redistribution" and Professor of Empirical Public Economics at the University of Mannheim. From 2008 to 2013, he was Senior Research Associate and from 2009 on Deputy Program Director for the research area "Future of Labor" at the Institute for the Study of Labor (IZA) in Bonn, Germany, where he now is a Research Fellow. He is also Research Associate at the Institute for Social and Economic Research (ISER), University of Essex, UK, and Research Affiliate at the Center for Economic Studies (CESifo) of the University of Munich, Germany. Andreas Peichl has been involved in various research projects conducted on behalf of national ministries, the European Commission, the European Parliament, the European Central Bank, and the OECD. His research focuses on empirical public and labour economics. His current research interests include (empirical) public economics, labour economics, and welfare economics with particular reference to optimal taxation, tax reforms and their empirical evaluation, tax benefit microsimulation, and the analysis of income distributions. His research has been published in various academic journals. After completing his thesis entitled "Could the World Be Flat? Simulating Flat Tax Reforms in Western Europe", Andreas Peichl received his PhD with summa cum laude from the University of Cologne, supervised by Prof. Dr. C. Fuest, in May 2008. From January 2005 until August 2008, he was PhD student at the University of Cologne and worked as a research assistant at the Cologne Center for Public Economics (CPE). In spring 2008, he was a visiting scholar at the Institute for Social and Economic Research (ISER) at the University of Essex, UK. Prior to his doctoral studies, he studied economics at the Philips-University of Marburg as well as the University of Cologne and graduated in December 2004 (Diplom-Volkswirt, equivalent to M.A. in Economics).

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