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

31 Pages Posted: 25 Jul 2018 Last revised: 28 Jun 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: June 26, 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 choice behavior and financial well-being. We find that more risk-averse and less knowledgeable members tend to invest in the default fund – a fund that is, however, one of the riskiest options on the choice menu. On top of this mismatch between members’ risk preferences and their investment choices, we find those members 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 (June 26, 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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