“We were all impressed by the work that [[Richard Thaler]] and [[Shlomo Benartzi]] had already performed in this field: together, they conceived a new mechanism for pension-saving that acknowledges one of the central principles of behavioural psychology – loss-aversion, the mental mechanism that causes us to experience more pain from losing £100 than pleasure from winning £100. “A typical pension works like this: if you buy a pension plan for £250 a month, every month thereafter you are £250 poorer, until your retirement, when you can redeem the annual salary which that pension provides. By contrast, Thaler and Benartzi’s ‘Save More Tomorrow’ pension worked differently: y**ou signed up for a pension at a certain rate (let’s say 20 per cent) but instead of starting immediately, your contributions would only represent a proportion of any future wage rises. So if you were given a £500-a-month pay rise, 20 per cent of it (if that is what you had chosen) would go towards your pension**. The same would apply to further pay rises: if, in your fifties, you were earning £50,000 more annually than when you took out the pension, you would by then be paying £10,000 each year into a retirement fund. **The result was that people taking out a ‘Save More Tomorrow’ pension would never be poorer because of it – they would just be ‘less richer’**. To an economist these two states are identical, but to the evolved human brain they are very different. “The idea worked: compared to the control group, twice as many people were willing to participate in the scheme and, of those who did, the average contributions after seven years were roughly double” --- **Tags** -- , [[quotes]], [[loss-aversion]] , [[fear-of-regret]] , [[economics]] , [[counter-intuitive-thinking]] , [[psycho-logic]] **Source** -- [[202407221554 - B - Alchemy]]