New research explores pennies vs. percent framing on savings decisions

Adding information architecture to reduce the savings gap

In a new Reducing Savings Gaps Through Pennies Versus Percent Framing paper, the Voya Behavioral Finance Institute for Innovation partnered with academic researchers to test whether reframing savings behavior in terms of pennies contributed per dollar earned – rather than percent of salary – can help consumers at the lower income spectrum. Stephen Shu (Cornell University), Hal Hershfield (UCLA), Richard Mason (Voya Financial and Carnegie Mellon University) and Shlomo Benartzi (UCLA)1 were interested in how this new pennies-based framing would impact real-world savings decisions, at least relative to a traditional percent-based frame.2

The motivation for this research is several fold. On the one hand, while auto-enrollment and auto-escalation are generally the best way to reduce savings gaps between subgroups of workers (e.g., income bands, genders, ethnicities), they are not feasible for all plans. For instance, many public-sector plans are prohibited from using auto-enrollment. In cases where auto-features are not possible, workers must actively choose their savings rates; they often do so by selecting a percentage of salary they will save.

Unfortunately, research across a number of domains suggests that a large fraction of people is less numerate, which means they either have lower levels of facility or are less comfortable with percentages. Thus, the new research explores reframing savings decisions using pennies, a more concrete concept, in order to reduce savings gaps between different subgroups of people (e.g., income bands).

The paper reveals that pennies reframing significantly impacts behavior and can help close longstanding savings gap between workers of different income levels. Furthermore, policy makers, retirement plans and organizations can consider using this information architecture approach to boost the savings rate of lower income participants, and thus help all workers achieve the financial security they deserve.

The research, to the best of the Institute’s knowledge, is the first empirical examination of pennies versus percent reframing in a consequential savings domain.

Key findings: Pennies reframing reduces the savings gap

Most notably, pennies reframing dramatically reduced the income savings gap, as those workers in the lowest income group (with an average income of $32,000) boosted their savings rate by 115 basis points.

In the percent condition, low-income workers had an average savings rate of 6.88%; in the pennies condition, workers had an average savings rate of 8.03 percent. To put this into perspective, this savings rate is nearly as high as the savings rate of participants in the highest income group, who saved 8.5% of their salary. (These higher income workers had a mean salary of $115,000.)

Further analysis reveals that workers with less than $50,000 in annual salary are the ones most helped by pennies reframing.

By making savings rates more salient and understandable, the new information architecture was able to reduce longstanding gaps between the haves and have nots, and help workers take steps to enhance their future financial security.

While this savings increase caused by pennies framing might seem modest, if implemented over the entire accumulation phase it would represent a boost of close to 20 percent in retirement income for those in the lowest income bracket.

What employers can consider to address the savings gap

  1. If possible, plans should consider re-enrolling all employees periodically, as it will have the largest impact on savings gaps and retirement outcomes.3
  2. If auto-features and re-enrollment aren’t possible, retirement plans should consider the use of pennies framing, especially for disadvantaged groups.
  3. This research focused on information architecture and retirement savings, but employers and their advisors and consultants should consider pennies framing for other savings accounts, such as emergency savings, health savings accounts, and employee benefits.

For instance, an emergency fund could be built through a combination of pennies framing and gradual escalation. Workers could be asked to save one penny out of every dollar earned for emergencies this year, two pennies next year and so on, until they have a viable reserve fund.

Another approach could make it easy for workers to save a dime for every dollar they earn, with an automatic allocation of those funds to various accounts based on a personalization algorithm. For instance, they could ask a participant to allocate six pennies for retirement, two pennies for emergencies, and two more pennies for health savings.


This research demonstrates the potential of behavioral research to democratize savings and identify scalable digital interventions that can ensure all workers are given the opportunity to achieve financial security.

The use of pennies reframing is particularly important because it provides an alternative to employers who want to improve employees’ retirement outcomes but who do not want to implement automatic enrollment features in their retirement plans. Relatively inexpensive and easy to implement, the pennies intervention seems to close longstanding savings gaps between lower income and high-income workers.

Want to learn more about the pennies intervention? Check out the full research.

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  1. Dr. Benartzi is a paid consultant to Voya Services Company, a wholly-owned subsidiary of Voya Financial.
  2. Shlomo Benartzi is grateful to George Fraser, a plan advisor, for suggesting the idea and inspiring this research.
  3. This assumes that auto-features are set up with characteristics properly informed by behavioral economics research, such as using appropriate, default initial deferral rates and annual escalator rates (e.g., not set too low). Beshears, John, et al. "How Do Consumers Respond When Default Options Push the Envelope?" SSRN 3050562 (2017).

This report is for educational purposes only. Each plan must consider the appropriateness of the investments and plan services offered to its participants. All investing involves risk, including the loss or principal. There is no guarantee an investment, investment strategy, or managed portfolio will meet its stated objective. Products and services offered through the Voya® family of companies.