Why Do Households Leave Money on the Table? The Case of Subsidized Pension Products

35 Pages Posted: 26 Dec 2017 Last revised: 9 Apr 2019

See all articles by Tobias Meyll

Tobias Meyll

University of Giessen - Department of Financial Services

Thomas Pauls

Goethe University Frankfurt

Andreas Walter

University of Giessen - Department of Financial Services

Date Written: April 2, 2019

Abstract

Many households still rely solely on bank deposits, despite the existence of subsidized pension products that guarantee the capital preservation and offer higher expected returns than holding money in bank deposits. We investigate the determinants that affect individuals’ decision to leave money on the table by refusing investments in subsidized pension products. Our results show that financial literacy and financial advice are positively related to holding such pension products. Surprisingly, although those products provide the capital preservation guarantee like bank deposits, we find the propensity to invest in subsidized pension products to decrease with higher risk aversion. This finding suggests a potential risk misperception, which might be explained by a higher complexity of those products. In that, our results emphasize the role of financial literacy and financial advisors for sound financial decision-making in increasingly complex financial markets.

Keywords: Household Finance, Financial Advice, Financial Literacy, Savings and Investment Behavior

JEL Classification: D8, D12, D14, G20

Suggested Citation

Meyll, Tobias and Pauls, Thomas and Walter, Andreas, Why Do Households Leave Money on the Table? The Case of Subsidized Pension Products (April 2, 2019). Available at SSRN: https://ssrn.com/abstract=3093261 or http://dx.doi.org/10.2139/ssrn.3093261

Tobias Meyll (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Strasse 74
Giessen, Hessen 35394
Germany
+49 (0) 641 9922522 (Phone)

Thomas Pauls

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://wiwi.uni-giessen.de/ma/dat/walter/Andreas_Walter/

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