‘Automatic Dis-enrolment’. The impact of the choice Architecture on Retirement Savings Decisions: Some evidence from Poland
‘Automatic Dis-enrolment’. The impact of the choice Architecture on Retirement Savings Decisions: Some evidence from Poland

Summary/Abstract: A privately managed, mandatorily funded defined contribution (FDC) part of the pension system has been introduced, or its implementation has been considered, in around 30 countries worldwide (Tapia and Yermo 2007). Poland introduced this system in 1999. Its coverage rose to 54.8 per cent of the working age population in 2011 (Antolin, Payet and Yermo 2012) but decreased to 9.49 per cent in 2014.1 At the same time, the contribution rates were decreased from the original 7.3 per cent applicable from January 1999 up to May 2011 to 2.92 per cent effective February 2014. Therefore, it seems safe to conclude that fifteen years after its introduction and following a series of minor reforms, it was virtually disassembled.Most interestingly, people were given a choice, during the most recent pension reform of 2014, to retain part of their pension contributions diverted into the now formerly mandatory second pil- lar of the pension system. However, the default option was set to divert the contributions in full to the first pillar, the mandatory notional (or non-financial) defined contribution (NDC) scheme (Hinz and Palmer 2008), unless an individual confirmed their will to maintain contributions to both pil- lars. The question is whether setting the default option to be transferred to the first pillar impacted the outcome. If it did, then this justifies the question as to whether this outcome is truly a reflection of rational, conscious decisions or whether it is an example of how defaults can affect and determine retirement savings decisions.This paper does not analyse the macroeconomic reasons driving this change. It centres on the micro scale, particularly focusing on the choice architecture which was set up for people and which resulted in such a significant change. The paper proceeds as follows: in order to provide objective background to the 2014 reform, the second section presents a brief history of the evolution of the pension system in Poland since 1999. This is followed by review of the literature on the subject of the choice archi- tecture, as well as inertia and procrastination, presenting prior evidence of their impact and leadingto the formulation of the research question in section 3. Section 4 comprises a presentation of the set of data and methodology used to verify the hypothesis. Findings are presented in Section 5, along with an exploration of possible explanations and a proposal of potential applications of the findings. Sec- tion 6 offers a conclusion.

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