In this paper, we provide an analysis of financial literacy in Peru and Uruguay. We find that the knowledge of simple concepts at the basis of financial decision-making is low in both countries. Not only is financial illiteracy widespread, but it is particularly acute among women, rural populations, the less educated, low-income people, the self-employed, the not employed, younger people (in the case of Peru), and older people (in the case of Uruguay). We also find that financial literacy is linked to measures of financial wellbeing: those who are financially literate are more likely to be able to save and plan for retirement in both countries. In addition, we find a relationship between knowledge of specific concepts and key financial behaviors. Lastly, we find a relationship between financial literacy and financial resilience

Many international pension systems have undergone extensive changes over recent decades, associated with a dominant narrative of the need to respond to the pressures of population ageing. This has resulted in an increasing emphasis on curtailing the role of the state and promoting individual responsibility for pension saving. However, there is currently limited research which considers attitudes and expectations surrounding pension developments and, in particular, the role of state pensions. This is despite these factors influencing pension savings behaviour. Existing research suggests that under-saving is most common amongst women (linked to their more fragmented employment histories throughout the lifecourse) and millennials (born in the early 1980s up to the mid- to late 1990s), indicating the importance of better understanding their attitudes and expectations regarding pensions. This article aims to address this knowledge gap by exploring, in the United Kingdom, millennial women's knowledge, attitudes and expectations regarding state pensions, using 45 qualitative interviews and a focus group. The findings demonstrate that millennial women's situation regarding state pensions is characterised by a lack of knowledge, awareness and certainty, which influences their pensions behaviour. It identifies that, in general, pensions were not perceived as a current financial priority, with more immediate priorities taking precedence. Active engagement with pensions and uncertainties throughout the lifecourse, many of which people cannot control, presented a challenge to pension saving. Retirement was often seen as a distinct stage, with participants struggling to visualise their long-term future. The research contributes to the limited international understanding of attitudes towards pension knowledge and expectations, and their links to pension behaviour. It highlights the need for measures to encourage a greater focus on longer-term saving habits, accompanied by a context of collective policy solutions to pension challenges, as opposed to framing pensions in a purely individualised neo-liberal policy framework which adversely impacts on women's pension prospects.

We report a study of the effects the choice set on financial decision making related to retirement savings and risky investment. The participants were presented with either a full range of choice options or a limited subset of the feasible options. The choices of saving and risk are affected by the position of each option in the range of presented options. This result demonstrated that the range of the options offered as possible saving rates and levels of investment risk influences decisions about saving and risk. The study was conducted on a sample of working people, and we controlled whether the participants can financially afford in their real life the decisions taken in the test. In addition, various measures of risk aversion did not account for the risk taken in each condition. Surprisingly, only the simplest and most direct risk preference measure was a significant predictor of the responses within a particular choice set context, although the actual choices were still very much influenced by the range. Thus, the results reported here suggest that financial judgments and choices are relative, which corroborates, in an important practical domain, previous related work with abstract gambles and hypothetical risky investments.

Based on nationally representative data (N = 8,901), this study investigates the extent to which expectations for intra-family transfers and government assistance in old age impact the probability of saving for retirement among working-age individuals in Thailand. Results show that expectations for financial non-self-reliance and expectations that family support would constitute the most important source of old-age financial security reduce the probability that working-age individuals would save for retirement. Expectations for government support have no impact on average. Given that filial piety is weakening in Thailand, this study suggests that the government encourage pre-retirement savings more strongly.

This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household's affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3–6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point 10 years before retirement has the same impact on the sustainable retirement standard of living as working between 1 and 2 months longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.

It has been long suggested that public pension wealth may crowd out household savings. However, there remains controversy about the extent of this displacement effect. In this paper we use an original microsimulation model based on retrospective survey data collected through the third wave of the Survey of Health, Ageing and Retirement in Europe (SHARE) to estimate the displacement effect of public pension wealth on other wealth in Belgium. Combining this rich dataset with an accurate estimation of the individual pension entitlements allows us to circumvent some of the main measurement error problems faced by previous studies. We estimate that an extra euro of public pension wealth is associated with about 14–25 cent decline in households’ non-pension wealth.

Many believe that global capital markets will generate lower returns in the future versus the past. We examine how persistently lower real returns will reshape work, retirement, saving, and investment behavior of older persons using a calibrated dynamic life cycle model. In a low return regime, workers build up less wealth in their tax-qualified 401(k) accounts versus the past, claim social security benefits later, and work more. Moreover, the better-educated are more sensitive to real interest rate changes, while the least-educated alter their behavior less. Interestingly, the distribution of wealth is more uniform in periods of persistent low expected returns.

We present an intertemporal portfolio choice model where individuals invest in financial literacy, save, allocate their wealth between a safe and a risky asset, and receive a pension when they retire. Financial literacy affects the excess return from and cost of stock-market participation. Investors simultaneously choose how much to save, their portfolio allocation, and the optimal investment in financial literacy. The model implies that one should observe a positive correlation between stock-market participation (and risky asset share, conditional on participation) and financial literacy, and a negative correlation between the generosity of the social security system and financial literacy. The model also implies that financial literacy accumulated early in life is positively correlated with the individual's wealth and portfolio allocations in later life. Using microeconomic cross-country data, we find support for these predictions.

This paper analyzes the effect of private supplementary pensions (and the tax reliefs that aim to stimulate such plans) on national saving in Spain. It tries to test the alleged positive effects of private pension plans on savings. Using a longitudinal dataset and fixed-effects methods, we find that tax-favored contributions to a pension fund are not associated with a lower consumption level, which implies that this policy does not increase national saving. The empirical results on the impact of contributions on private household wealth are less clear.

The Consumer Information Working Party has published this paper which explores how we can better engage consumers with long-term savings and investments. The working party considered the current state of consumer information, which is a long way from ideal, including: consumer insights and touch points, the current consumer information model, relevant considerations from behavioural economics, examples of information failures and some successes from other fields. They then propose a way to deliver more effective information, including a possible framework and some ideas for its application. They finish with proposals for immediate next steps and urge the Actuarial Profession to take a lead in this area.

We examine financial literacy in the US using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are much more likely to plan for retirement, which is likely to leave them better positioned for old age. Our results will inform those seeking to target financial literacy programmes to those in most need.

The paper investigates the level and incidence of saving required in order to maintain the standard of living that a household experiences whilst of working age into retirement. In order to do this, a model has been constructed that follows the income and expenditure of a household, allowing for tax and social security, as well as changing family circumstances. The model can be used to explain how a household should save in order to achieve a given standard of living in retirement.

The author concludes that the usual message, to save a fixed proportion of income throughout a working lifetime, is at best not helpful and at worst could lead to a lower standard of living over the household's lifetime. People can and should manage the timing of their saving and borrowing in order to achieve optimum incomes.

It is well known that the performance of simple models of economic growth improves substantially through the introduction of subsistence consumption. How to compute subsistence needs, however, is a difficult and controversial issue. Here, I reconsider the linear (Ak) growth model with subsistence consumption and show that the evolution of savings rates and economic growth rates over time is independent of the size of subsistence needs. The model is thus more general and less subject to arbitrariness than might have been thought initially. Quantitatively, it is shown that, although there is no degree of freedom to manipulate transitional dynamics, the model approximates the historical evolution of savings rates and growth rates reasonably well.

Spain’s financial position during the late 19th and early 20th centuries has usually been presented as one of persistent deficit on current account, which resulted from her integration into international commodity and factor markets and this, in turn, slowed down the growth of the economy. In this essay a preliminary reconstruction of the balance of payments on current account allows us to reject this view. In fact, a net capital inflow made possible to meet the demand for investment-boosting economic performance. Current account reversals in a context of macroeconomic domestic imperfections help to explain the economic slowdown at the turn of the century.