Plan knowledge and trust in financial institutions – two variables missing from standard neoclassical or behavioral models of decision-making – are strongly correlated to 401(k) savings behavior based on results from this paper. In voluntary enrollment settings, plan knowledge and demographic characteristics are related to participation in a 401(k) plan. In automatic enrollment settings, trust in financial institutions and knowledge of an available plan match are related to participation. Although this study cannot prove causality of the relationships, it does extend our understanding of the complex factors underlying savings choices. Policy implications are discussed.

This paper facilitates the exploration of optimal individual retirement savings strategies within a life-cycle framework by providing a convenient tool to implement a model suggested by Yaari (1965) with an uncertain lifetime and borrowing constraints. The solution is given both for the general case and for cases leading to closed-form equations such as power utility and Gompertz mortality. Illustrations for a wide range of parameters indicate that starting to save for retirement in the first phase of one's career is rarely optimal. Of course, this is not to say that young workers should not save for other motives – a limitation of this model is that risks besides mortality are not considered. The conclusion should also be interpreted cautiously as it is difficult to represent every possible individual circumstance and saving incentive in a single model. The intuition behind the result is that an efficient strategy allocates the burden of financing retirement first to periods with higher income (i.e. lower opportunity costs), creating the potential for an initial period without savings when income grows.

In most industrial countries, public pension systems redistribute from workers to retired people, not from high-income to low-income earners. They are close actuarial fairness. However, they are not all equivalent. In particular, some pension benefits are linked to full lifetime average earnings, while others are only linked to partial earnings history. In the latter case, we then show in this article that an actuarially fair pay-as-you-go pension system can both reduce lifetime income inequality and enhance economic growth. We also shed light on the dilemma between inequality and economic growth in retirement systems: greater progressivity results in less lifetime inequlity but also less growth.

The aim of this paper is to analyze the dynamic effects of the different parametric reforms oriented to reach the financial balance of public pension systems on the well-being of the retired population. Using the Spanish social security system as a case study, a duration analysis is implemented to look for a causal relationship and then estimate separately the effects of an effective retirement age delay and a replacement rate reduction as well as the combined effect of these two measures. We also estimate the effects of a delay on the reforms. We find that a change in the effective retirement age would have positive effects on the individual welfare of retired population, while a reduction of the replacement rate would diminish it. The combined effect of the two measures would finally translate into a welfare lost of the retired population. The delay on the reforms implies higher welfare loss (to the affected generations) than the analyzed reforms.

This paper argues that a substantial portion of the risks associated with the defined benefit (DB) pension schemes operated by regulated utilities in the UK will, in practice, fall on customers via the tariffs that they pay for regulated goods and services. It examines the assumptions made by regulated companies in their FRS 17 valuations. These assumptions generate parameters that systematically understate both the present value of pension liabilities and current service costs. These are re-estimated using the risk-free real rate of discount and compatible assumptions. On this basis, the total pension deficit for the sample increased from £12.7 billion to £56.3 billion in 2009, equivalent to about 110% of regulated revenues. Further, the cost of current service for 2008–09 was 20% higher than total contributions in the year, despite large top-up contributions. If contributions were increased to cover current service costs and to eliminate pension deficits over a period of 10 years, the additional contributions would amount to 235% of actual contributions or 13% of regulated revenues implying a significant increase in regulated charges. Companies in the communications and transport sectors face the largest adjustments in addressing the problems of underfunded pension schemes.