Appreciated but Complicated Pension Choices? Insights from the Swedish Premium Pension System

32 Pages Posted: 25 Jul 2018 Last revised: 3 Apr 2019

See all articles by Monika Böhnke

Monika Böhnke

Maastricht University - Department of Marketing

Elisabeth Brüggen

Maastricht University

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance; Netspar

Date Written: April 2, 2019

Abstract

We analyze preferences and beliefs of members in a DC pension scheme from Sweden, one of the first countries that launched choice-based funded individual pension accounts. Based on a survey among 2,646 members, we study the effect of choice overload, risk tolerance, and subjective knowledge on self-reported choice behavior and perceptions of financial well-being. Regarding choice behavior, we find that members who are more risk-averse and report low levels of subjective knowledge tend to invest in the default fund – a fund that is, however, one of the riskiest on the choice menu. On top of this mismatch between members’ risk preferences and their investment choices, we also find that risk-averse members and members with low subjective knowledge are more likely to feel negative about their future financial well-being. We also find a positive correlation between financial well-being and choice appreciation, whereas the act of choosing a fund has only minor impact.

Keywords: Pensions, Choice, Financial Well-Being

JEL Classification: D14, D83, D91

Suggested Citation

Böhnke, Monika and Brüggen, Elisabeth and Post, Thomas, Appreciated but Complicated Pension Choices? Insights from the Swedish Premium Pension System (April 2, 2019). Available at SSRN: https://ssrn.com/abstract=3208077 or http://dx.doi.org/10.2139/ssrn.3208077

Monika Böhnke

Maastricht University - Department of Marketing ( email )

Maastricht NL, 6200 MD
Netherlands

Elisabeth Brüggen

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Thomas Post (Contact Author)

Maastricht University - School of Business and Economics - Department of Finance ( email )

Tongersestraat 53
Maastricht, 6200 MD
Netherlands
+31 43 38 83899 (Phone)
+31 43 38 84875 (Fax)

HOME PAGE: http://www.thomas-post.com

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

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