Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment

By: John Beshears, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook and Neil Stewart

Format:Print
| Language:English
| Pages:79

Abstract

Does automatic enrollment into retirement saving increase household debt? We study the randomized roll-out of automatic enrollment pensions to ~160,000 employers in the United Kingdom with 2-29 employees. We find that the additional savings generated through automatic enrollment are partially offset by increases in unsecured debt. Over the first 41 months after enrollment, each additional month increases the average automatically enrolled employee’s pension savings by £33-£39, unsecured debt (such as personal loans and bank overdrafts) by £7, the likelihood of having a mortgage by 0.05 percentage points, and mortgage balances by £120. Automatic enrollment causes loan defaults to fall and credit scores to rise modestly.

Keywords

Retirement; Saving; Personal Finance; Borrowing and Debt; Credit; Compensation and Benefits

Citation

Beshears, John, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook, and Neil Stewart. "Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment." Working Paper, October 2024.