Work

Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment

Year: 2024

Type: report

Abstract: Does automatic enrollment into retirement saving increase household debt?We study the randomized roll-out of automatic enrollment pensions to ~160,000 employers in the United Kingdom with 2-29 employees.We find that the additional savings generated through automatic enrollment are partially offset by increases in unsecured debt.Over the first 41 months after enrollment, each additional month increases the average automatically enrolled employee's pension savings by £33-£39, unsecured debt (such as personal loans and bank overdrafts) by £7, the likelihood of having a mortgage by 0.05 percentage points, and mortgage balances by £120.Automatic enrollment causes loan defaults to fall and credit scores to rise modestly.

Source: National Bureau of Economic Research

DOI: 10.3386/w32100

Authors: John Beshears, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David I. Laibson, Richard Notley, Jesal Sheth, Will Sandbrook, Neil Stewart

Institutions: National Bureau of Economic Research, Harvard University, University of Nottingham, Yale University, University of Warwick

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W4392145545

Cites: 33

Cited by: 16

Related to: 10