Save(d) By Design

When it comes to helping workers with their retirement security, the industry has historically focused on automatic enrollment and match incentives as the primary tools for helping move their employees in a positive direction. 

Through insights from the field of behavioral finance, we’re sharing new findings from research conducted in association with the Voya Behavioral Finance Institute for Innovation that suggests making simple adjustments to website architecture can present another promising way to improve the choices of auto-enrolled workers — something that can be attractive to an employer that is not in a position to change its match level or plan design. 

In a new working paper “Save(d) by Design,” scientists from Carnegie Mellon University, City, University of London and UCLA1 published results from a pioneering field study that involved more than 8,500 employees across 500 workplace retirement plans. The workers, who were auto-enrolling into their employer-sponsored 401(k) plan, visited their respective enrollment websites to either confirm, decline or make personal adjustments to their savings selection. Let’s take a closer look at how we got there.

The study examined what would happen to their choices when three types of design enhancements were made to the site, including:

1) Moving important plan information (i.e. default savings rate) closer to where the individual was prompted to act;

2) Simplifying and standardizing the language associated with the enrollment options; and

3) Changing from a single color design on the election buttons to three “traffic light” colors. 

Findings revealed that small digital changes can lead to big results in terms of greater personalized enrollment, more employees taking advantage of the full company match, increased savings and improved long-term financial security.2 Highlights included the following: 

  • Greater enrollment personalization: The number of employees who personalized their enrollment increased by 15 percent. Among those who personalized, the average contribution rate was 7.8 percent, compared to 3.4 percent for those who accepted auto-enrollment. 
  • Greater take-up of full company match: The enhancements resulted in a 19 percent increase in the share of employees who took advantage of the company’s full match benefit. This demonstrated how optimized enrollment design could actually increase the effectiveness of existing matching incentives.    
  • Greater plan savings and improved retirement security: The design changes also led to an increase in savings levels, boosting the average contribution rate by 62 basis points, or roughly 10 percent across all digital enrollees. That lift was equivalent to what one would expect from increasing the typical employer match by 62 percent.

These results further suggest that by adjusting online enrollment architecture, employers have an opportunity to generate improvements that are similar to if they substantially increased their match program. It’s exciting to imagine how we can build on this learning, which is some of the first evidence to show that digital design matters in an online enrollment setting. We encourage plan sponsors to explore the potential benefits that can come with a deeper understanding of digital design.

1. Saurabh Bhargava, Lynn Conell-Price, Richard T. Mason, and Shlomo Benartzi. “Save(d) by Design,” Working Paper, October 2018. Available at SSRN. 2. The tested enhanced design led to a 9 percentage point increase in the share of employees who personalized enrollment (on a baseline of 60 percent), an 11 percentage point increase in the share of employees taking full advantage of their employer match (on a baseline of 58 percent), and 62 basis point increase in the average contribution rate by employees (on a baseline of 5.41 percent of income).