Simplified Enrolment in Retirement Savings Plans

Summary

Simplified Enrolment in Retirement Savings Plans by Boris Palameta, Carole Vincent, and
Jean-Pierre Voyer assesses the feasibility of testing the effectiveness of pilot schemes that involve simplified enrolment procedures for employees’ participation in employer-sponsored pension plans. This study puts forward options for the design of pension plans that can enable higher participation and better decision-making by changing the ways the decision to participate in the employer-sponsored plan is presented to eligible employees, building from ample empirical evidence to suggest that low saving rates stem, at least in part, from the way choices are offered and presented. The study provides details for the implementation of a randomized field experiment to rigorously assess the effectiveness of two schemes — one that combines simplified enrolment procedures with default contribution rate and investment options, and another that requires eligible employees to make an active decision about contribution rate. The results of the proposed experiment would be extremely informative for governments and also employers and service providers who are considering offering Pooled Registered Pension Plans when they become available.