The Power of Percentage: Quantitative Framing of Pension Income

CentER Discussion Paper Series No. 2017-048

31 Pages Posted: 8 Dec 2017 Last revised: 16 Jan 2018

Date Written: December 4, 2017

Abstract

We investigate whether the quantitative frame used to communicate future pension income to plan members matters for perceived pension income adequacy. We allocate plan members randomly to one of four pension income framing conditions: annual pension income, monthly pension income, pension income as percentage of current income, pension income as decimal of current income. We find that expressing projected pension income as a percentage (decimal) of current income significantly increases (decreases) the probability that a plan member perceives the pension income as too low. This effect is robust to adding retirement savings attitude. In addition, we find significant and intuitive effects of household wealth, income, age and education on perceived pension income adequacy. We discuss our findings against the backdrop of previous studies on the effect of numeric frames on perceptions, provide suggestions for further research and draw conclusions for pension communication and survey design.

Keywords: framing effects, pension income, perceived adequacy

JEL Classification: C5, C9, D12, G11

Suggested Citation

Prast, Henriette M. and Teppa, Federica, The Power of Percentage: Quantitative Framing of Pension Income (December 4, 2017). CentER Discussion Paper Series No. 2017-048, Available at SSRN: https://ssrn.com/abstract=3082304 or http://dx.doi.org/10.2139/ssrn.3082304

Henriette M. Prast (Contact Author)

Tiburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Federica Teppa

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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