Saved by design
When it comes to an employee’s financial well-being in retirement, many of the most critical decisions are made during the initial enrollment process. To help nudge workers in a positive direction, the retirement industry has historically focused its attention on instituting automatic enrollment and providing generous match incentives. However, research from The Voya Behavioral Finance Institute for Innovation suggests another promising opportunity — one that could be even more attractive to an employer that is not in a position to increase the generosity of its match or change its plan design.
In the working paper “Save(d) by Design,” researchers 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 scheduled to be auto-enrolled into their employer-sponsored 401(k) plan, visited their respective enrollment websites to either confirm, decline or make personal adjustments to their savings selection.
The study examined the impact of the following three design changes on the enrollment choices of employees:
- Moving important plan information (i.e. default savings rate) closer to where the individual was prompted to act;
- Simplifying and standardizing the language of the enrollment options; and
- Changing from a single color design on the election buttons to three “traffic light” colors.
Findings revealed that small design changes to a retirement plan’s enrollment website can lead to greater personalized enrollment, match take-up, average 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 design 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. Because of the “stickiness” of an employee’s initial contribution decisions, these increases in contributions due to design can lead to meaningful improvements to long-term retirement security.
If a company is looking to improve participant savings, and an individual's long-term retirement security, as well as overall plan engagement, making small digital adjustments to an enrollment website can be a powerful strategy. By enhancing the online enrollment architecture in this manner, companies can generate improvements to retirement outcomes that are similar to the results of a dramatic match increase.
We encourage plan sponsors and advisors to explore the potential benefits that 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).