Personalizing Information to Improve Pension Savings

This study explores how providing simulations to poor individual in a defined contribution setting (Chile) that identify the impact of formalizing their employment or delaying their retirement age may improve their pension saving and, through that, their life-time welfare. Individuals who approach a self-service module in government offices that many low-income individuals need to visit regularly to obtain benefits will be randomly allocated to receiving some personalized simulations regarding how some change in contribution behavior can affect their potential pension wealth while others will simply be given the generic information about how one can improve their pension wealth. We will study the impact of the provision of information on savings accumulated within the pension fund through administrative data provided by the pension funds supervising agency over the following 18 months, which will also provide information on labor supplied in the formal market. We postulate that most low-income individuals do not realize the impact that non-formal work may have on their eventual pension wealth and that our pension simulator will give them the information necessary to make them gain a better understanding. We further hypothesize that this new knowledge will be used to alter some labor supply decisions of the individuals.