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Optimal Decisions On Pension Plans In The Presence Of Financial Literacy Costs And Income Inequalities

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Executive Summary

Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals' side in building an efficient portfolio for retirement. In this paper the authors provide a model describing workers' choices on the allocation of retirement savings in presence of mandatory contribution; Portfolio decision; Financial literacy costs. In particular, they characterize the results both from a positive and normative standpoint, by highlighting the determinants of the individual's choice, with special focus on financial literacy costs and wage level inequalities and by characterizing the optimal contribution rate to mandatory complementary pension schemes.

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