XXVI Edition

14-15-16 December 2017"

The Power of Percentage: Quantitative Framing of Pension Income

Prast Henriette, Tilburg University Finance Department
Teppa Federica, Dutch Central Bank, policy and Research Department

We investigate whether the quantitative frame used to communicate future pension income to plan members matters for perceived pension income adequacy. We allocate plan members randomly to one of four pension income framing conditions: annual pension income, monthly pension income, pension income as percentage of current income, pension income as fraction of current income. We find that expressing projected pension income as a percentage of current income significanly increases the probability that a plan member perceives the pension income as too low. This effect is robust to adding household wealth, income, age and education. We find plausible effects of these background variables on perceived pension income adequacy. We conclude that in communication with plan members the pension industry should take account of this framing effect.

Area: Financial Education

Keywords: Framing; Pension Awareness; Retirement Saving; Pension Communication

Paper file

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