The Importance of Behavioural Factors for Pension Savings Decisions – Cross-Country Evidence

Abstract

In this study, we challenge the problem of inadequate voluntary pension savings by exploring the micro-dataset of the Luxembourg Wealth Study (LWS) for three countries: Italy, the United Kingdom and the United States. The existing empirical literature usually focuses on the role of socio-demographic factors to understand this phenomenon, and theoretical studies additionally highlight the role of behavioural factors. However, empirical studies in this field are extremely scarce. The use of the LWS data enables us to fill this research gap. Separately for each country, we verify the role of individuals' risk attitudes and intertemporal choices in the demand for voluntary pension savings. To make the results more robust, we add a set of socio-demographic control variables to our regressions. Our findings clearly reveal that being more risk averse and being less forward looking negatively affect people's propensity to save for retirement. Furthermore, we confirm that age, gender and education are significant predictors of pension demand in each of the analysed countries. We argue that these conclusions have practical meaning to improve regulatory frameworks.