Loss aversion - pension hike may cause some to leave workplace pension scheme

Behavioural economics meets financial economics in this news article from the BBC.

Over 10 million people have auto enrolled into pension contributions since 2012 when employers were required to offer a pension scheme to their employees.

But an increase in monthly pension contributions from 3% to 5% is due to arrive in April 2019 which is likely to hit the disposable incomes of those affected.

Richard Thaler made the case that people are reluctant to enter into pension programmes if they fear the loss of income in the short run.

The softening blow from an increase in the income tax allowance and a modest rise in real wages may not be enough to prevent some people from dropping out of their workplace pension scheme.