Chapter

Fees, Framing, and Financial Literacy in the Choice of Pension Manager

Justine Hastings, Olivia S. Mitchell and Eric Chyn

in Financial Literacy: Implications for Retirement Security and the Financial Marketplace

Published in print October 2011 | ISBN: 9780199696819
Published online January 2012 | e-ISBN: 9780191732089 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199696819.003.0006

Series: Pensions Research Council

Fees, Framing, and Financial Literacy in the Choice of Pension Manager

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A growing literature shows how consumers make mistakes in a variety of different settings pertinent to financial decision-making. Using data from a randomized experiment in Chile, we show how different ways of presenting pension management fees shape consumer choices, and how responses to pension fee information varies by level of financial literacy. Our results indicate that, in choosing pension funds, those with lower levels of education, income, and financial literacy rely more on employers, friends, and coworkers, than on fundamentals. We also find that such individuals are more responsive to information framing when interpreting the relative benefits of different investment choices.

Keywords: financial literacy; pension; income; education; saving; manager; participants; Chile

Chapter.  6079 words. 

Subjects: Pensions

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