Bauer, R., Eberhardt, I. & Smeets, P. A Fistful of Dollars – Financial Incentives Improve Retirement Information Search. Working Paper.


Under-saving for retirement is a problem in the Netherlands, where one in three Dutch people has a savings gap. Individuals can fill this gap with private savings; however, they first need to be aware of their potential savings gap, which rarely is the case. While pension awareness in the Netherlands is very low, Dutch pension funds pay $397.54 million per year for their communication with the participants, which is required by Dutch regulators. This money is lost, though, if participants do not read the communication. It is therefore important to understand how to effectively communicate with pension participants so they become informed about their pensions.

Key Findings

In two field experiments with the participants of the Dutch pension fund for the retail sector (Bedrijfstakpensioenfonds voor de Detailhandel), one of six types of letters was randomly sent to 245,712 and 257,433 participants, respectively. In the first experiment, next to the control letter, four letters employed different social norms to persuade participants to log in to their personal website and look at personal retirement information. With the sixth letter, researchers tested whether financial incentives in the form of a lottery of 100 vouchers worth €25 were more effective than the social norm treatments. Ultimately, the authors found that social norms were ineffective. In contrast, financial incentives increased the click rate at the pension planner by 47% compared to the control group. Further, people in the financial incentives group did not merely log in to cash in the incentive, but also looked at information about their pensions.

In the second experiment, the authors varied the type of lottery, while holding the total amount raffled constant. For example, in one treatment, 200 vouchers each worth €10 were raffled, while another version offered two €1,000 vouchers. The authors replicated the findings from their first study, observing the lottery with larger amounts and fewer winners was most effective and increased the information search by 91%.

Importantly, three weeks after the intervention, participants who looked at the personal pension website also scored higher in a pension knowledge quiz. Thus, pension knowledge is positively correlated with increased private savings. Moreover, the effect of financial incentives and social norms was independent of participant demographics, e.g. incentives worked equally well for both male and female participants.

Practical Relevance

Pension communication is important in prompting people to be informed about their future retirement income. However, only when participants know they have a savings gap are they more likely to save privately as well. Therefore, pension funds must be able to reach participants with their communication so they can process information on retirement income. The study showed financial incentives of fewer, larger amounts (in this case €2,000) to be a cost-effective way to increase information search and pension knowledge substantially.