Does Literacy Really Foster Pension Fund Participation? Some Evidence from a Survey of Italian Employees

Abstract:     
As a result of the 2005 reform, pension fund participation in Italy has increased significantly but less than expected moving from 14 up to 24 per cent of the employed workforce. Among others, the lack of financial skills as well as of the knowledge on how public pension system really works might have played a significant role in discouraging potential members. This paper aims at examining whether financial and Social Security literacy do matter in the decision to adhere to a pension fund. Data from a COVIP survey of private sector employees show that people have low financial and Social Security literacy and on average pension plan members have slightly higher literacy than non members. A multivariate analysis offers evidence of a potentially stronger effect of Social Security literacy vis à vis financial literacy on the decision to adhere to pension funds as well as of the importance of country-specific structural issues. These findings may be useful for designing information and awareness campaigns aimed at increasing pension fund participation.

Number of Pages in PDF File: 25

Keywords: pension funds, retirement planning, financial literacy, Social Security literacy

JEL Classification: G23, D91, I22, H55

working papers series