How default retirement funds enact long-lasting financial changes

While nudges have proven to be effective, are they long-lasting? To investigate this, researchers studied the 2000 launch of a new component of Sweden’s social security system, the Premium Pension Plan. Building upon their understanding of choice architecture, the Swedish government included two distinct nudges in their design. The first was a default; individuals made no choice about which portfolio they wanted. The second, a ‘do-it-yourself nudge,’ encouraged investors to determine their own portfolios. This option was the focus of a well-funded national advertising campaign. Initially, two thirds of savers chose their own portfolios, however as ad funding declined after the first year, fewer people chose the ‘DIY’ option. In recent years, less than 1% of new savers created their own portfolios. Most people in the second condition stayed in this condition permanently. In summary, the effects of the nudging were steadfast and seemed to last years.