OECD Reviews of Pension Systems: Peru by OECD

Author:OECD
Language: eng
Format: epub
Tags: development/finance
Publisher: OECD Publishing
Published: 2019-09-09T00:00:00+00:00

Nudges for independent workers

Insights from behavioural economics have encouraged the use of new techniques to foster pension savings across independent workers in various countries. One example is found in Brazil, where the Brazilian Ministry of Social Security experimented in 2014 with reminders by post to independent workers about their obligation to contribute to social security. Compliance rates increased by 7 percentage points within the first three months after sending the reminders (OECD, 2018[16]).

Another interesting example of nudging people to save for retirement is in Mexico, where the regulatory commission (CONSAR) and the private retirement fund administrators (AFORES) have explored new ways to narrow the savings gaps by encouraging voluntary retirement savings based on insights from behavioral economics. Three years of experiments (from 2015 to 2018) led to several lessons learned. First, capturing the attention of workers is a critical first step, and can be done using both regular mail and text messages as well as sending frequent reminders. Second, providing clear feedback on how savers are doing in the accumulation of retirement savings can be effective. Retirement account statements received by workers showed a thermometer intended to illustrate the evolution of savings, alongside other personalised tips for savings. This increased the number of account holders making contributions by 40%. Third, the use of a smartphone app that pictured the face of users as if they were old made them empathise with their future self, and led to an increase in 13% of account holders making contributions. The app “Afore Movil” also makes contributing to pensions easy, and takes advantage of the significant number of mobile phone users as a way to expand pensions coverage (Fertig, Fishbane and Lefkowitx, 2018[17]) (IDB, 2017[18]).

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