Data & Research October 3, 2016

Research Shows Expected Retirement Income Information Affects Savings

Germans who received information about retirement and expected pensions increased private savings, researchers found.
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Research suggests that information about expected retirement income can nudge individuals to increase their retirement savings.

A research report published by the National Bureau of Economic Research (NBER) explains that in an effort to increase transparency, the German public pension authority implemented a reform which changed the way information about retirement savings are provided.  In particular, as of 2004 the pension authority started to send out annual letters which provide detailed and comprehensible information about the pension system in general and individual expected pension payments.

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The letters inform recipients about the individual date of statutory retirement and the pension payments that they can currently expect upon retirement. The letters also nudge individuals to save more through private retirement accounts.

Researchers used German tax return data from administrative records to study the effect of information letters on private retirement savings, and the results indicate that receiving the letter increases contributions to a private retirement account. The effect was fairly sizable—about 40 EUR per year at the higher age cutoff and 20 EUR per year at the lower cutoff, representing 33% and 16%, respectively, of the average age-group specific post-reform savings. 

The researchers note that findings indicate that the letter effects are smaller, yet still significant, at the lower age cutoff compared to the older one; that is, retirement contributions of younger individuals are less responsive to the information. They contend this may either suggest that younger individuals, who are more than 30 years away from retiring, do not plan far ahead, or they do not have sufficient levels of income to save through private retirement accounts.

The research report may be requested from http://www.nber.org/papers/w22684.
Products October 3, 2016

LIMRA LOMA SRI Reveals Client-Facing Fiduciary Training

The Department of Labor fiduciary rule will fundamentally change the way companies and financial professionals interact with their clients. 
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LIMRA LOMA Secure Retirement Institute launched a new online training program “created to provide essential knowledge about the Department of Labor’s (DOL) fiduciary rule and its implications for client-facing professionals—employee and contracted.”

“It is critical that companies ensure all of their client-facing professionals have a common understanding of the rule, and how it will impact the information and/or advice provided to prospects and clients,” says Kathryn Reid, vice president, LIMRA Assessments and Development Solutions. 

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She explains the new training program, known as “Fiduciary Education for Sales and Service Professionals,” is built around a self-paced online curriculum designed to educate all client-facing employees, including registered representatives, investment adviser representatives, insurance agents, wholesalers, contact center representatives and service personnel. 

The program is comprised of a base course and role-specific courses for both fiduciary and non-fiduciary roles. The base course “clearly explains the DOL fiduciary rule and the Best Interest Contract Exemption (BICE), using realistic scenarios to illustrate how to remain compliant under the new regulatory environment.” The program also features an annual re-certification course to ensure employees and representatives continue to have the best and most-up-to-date understanding of the DOL fiduciary rule and its implications as the implementation unfolds.

“Under the new rule, financial services companies not only need to educate their employees, but they also need a way to track and document compliance,” adds Paul Henry, managing director, LIMRA Secure Retirement Institute.  

Companies that already use LIMRA’s Compliance Education Platform to deliver anti-money laundering, or detecting elder financial abuse programs will receive a discounted rate for the new fiduciary training program. More information is available here.  

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