Well-Appreciated but (Too) Difficult Pensions Choices? Insights from the Swedish Premium Pension System
By Monika Böhnke (Maastricht University – Department of Marketing)
We analyze experiences of savers in a DC pension scheme from Sweden – a country that was among the first to launch choice-based funded individual pension accounts. Based on a survey among 2,646 savers, we find that the average saver feels unknowledgeable about the scheme and experiences choice overload. Pension savers with a high degree of choice overload are likely to be influenced in their investment decisions by peers and advisors. Low knowledgeable and risk-averse savers tend to invest in the default fund – a fund that is, however, one of the most risky funds. On top of this mismatch between savers’ risk-aversion and investment choices we also find that risk-averse savers and savers with low subjective knowledge are more likely to feel pessimistic about their future financial well-being.