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RESEARCH PRODUCT

Financial literacy is not enough: The role of nudging toward adequate long-term saving behavior

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Abstract This paper analyzes whether nudging has a relevant effect on financially literate individuals, even if these individuals are professionals with extensive experience of finance and pensions. The paper presents the results of a field experiment with employees of a leading life and pensions company in Spain. The results of the experiment show that financial literacy and awareness of the importance of saving are not enough for individuals to act. Even with pension plan experts, the combination of two types of instruments is necessary: rational instruments, such as financial literacy and awareness of the economic implications of retirement, and nudging, which moves individuals to action in a meaningful way. In this case, an effective approach is to use the default option to increase long-term saving patterns. The Ahorra+ program, which was implemented in 2016 with 282 employees and in 2017 with 405 employees, significantly increases voluntary savings and helps people prepare for retirement.