Does pension awareness reduce pension concerns? Causal evidence from the Netherlands

Three-quarters of Dutch employees are concerned about their pension situation. The government and pension funds are struggling to increase the trust of society in the pension system and reduce their concerns. Existing literature shows that the financial- and pension literacy is low, while it is clearly interrelated with retirement planning and financial concerns. However, these findings are based on associations, only few studies attempted to uncover causal relationships. This research tries to uncover the causal effect of pension awareness on pension concerns, by applying an instrumental variable approach using micro data on Dutch citizens. In this study, pension awareness consists of two components, namely knowledge on the pension system and knowledge on the personal pension situation. The instrument used to uncover the causal effect is a randomly sent letter containing pension information. The data are derived from the PanelWizard survey on pension awareness for individuals aged 20 to 64. In the estimation results, evidence is found of a significant negative effect of pension awareness on pension concerns. Both pension knowledge and knowledge on the personal pension situation reduce pension concerns. Furthermore, this study examines heterogeneous effects with regard to gender. Results show that the negative effect of pension knowledge on pension concerns is stronger for men than for women. While the negative effect of knowledge on the personal pension situation on pension concerns is stronger for women than for men. These findings have implications for pension policy in the coming pension reform. The government can consider improving the pension awareness of society to reduce their concerns.