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Behind the success of dominated personal pension plans: sales force and financial literacy factors

Published online by Cambridge University Press:  12 November 2019

Giuseppe Marotta Open the ORCID record for Giuseppe Marotta [Opens in a new window]
Giuseppe Marotta*
Affiliation:
Economics Department, University of Modena and Reggio Emilia, viale Berengario 51, Modena, 41121, Italy
*
*Corresponding author. Email: giuseppe.marotta@unimore.it
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Abstract

The revealed preference for dominated insurance-based personal pension plans (PPPs) in Italy is a decade-long puzzle. I surmise that a motivation from the supply side is a sales force factor deriving from the geographical distribution of financial providers, including the countrywide network of the state controlled Post Office. I provide supporting evidence using three biennial waves of the Bank of Italy's survey on household finances from 2010 to 2014. The time interval includes a public pension system reform sharply raising the statutory age retirement, legislated in December 2011 to defuse a sovereign debt crisis. I show that the salience effect on the awareness of the benefits of supplementing lower perspective public pensions with PPPs increased the explanatory power of financial strength indicators. Exploiting a module in the 2010 wave I estimate a surprising decrease in the probability of subscription to PPPs in 2014 associated with the indicator for the highest financial literacy level.

Keywords

Italypensionsprivate pension systemsretail financial products distribution

JEL classification

E21: Consumption • Saving • Wealth G11: Portfolio Choice • Investment Decisions H55: Social Security and Public Pensions D91: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Type
Article
Information
Journal of Pension Economics & Finance , Volume 19 , Issue 4 , October 2020 , pp. 532 - 547
Copyright
Copyright © Cambridge University Press 2019

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