Behind the success of dominated personal pension plans: sales force and financial literacy factors. (12th October 2020)

• Record Type: Journal Article
• Authors: Marotta, Giuseppe
• Is Part Of: Journal of pension economics & finance. Volume 19:Number 4(2020:Oct.)
• Page Start: 532
• Page End: 547
• Publication Date: 2020-10-12
• Subjects: Italy, -- pensions, -- private pension systems, -- retail financial products distribution; D91, -- E21, -- G11, -- H55; Pensions -- Finance -- Periodicals; Social security -- Finance -- Periodicals; 331.25205
• DOI: 10.1017/S1474747219000209
• Languages: English
• ISSNs: 1474-7472

Abstract

Abstract: The revealed preference for dominated insurance-based personal pension plans (PPPs) in Italy is a decade-long puzzle. I surmise that a motivation from the supply side is a sales force factor deriving from the geographical distribution of financial providers, including the countrywide network of the state controlled Post Office. I provide supporting evidence using three biennial waves of the Bank of Italy's survey on household finances from 2010 to 2014. The time interval includes a public pension system reform sharply raising the statutory age retirement, legislated in December 2011 to defuse a sovereign debt crisis. I show that the salience effect on the awareness of the benefits of supplementing lower perspective public pensions with PPPs increased the explanatory power of financial strength indicators. Exploiting a module in the 2010 wave I estimate a surprising decrease in the probability of subscription to PPPs in 2014 associated with the indicator for the highest financial literacy level.