Family background and the decision to provide for old age: a siblings approach

The Riester pensions in Germany provide helpful evidence to better understand the determinants of and the barriers to the demand for old-age provision products. The paper argues that families are of key importance in the decision making process to buy such a private pension. Families do not only shape the way we make our financial decisions, they can also be a source for cost-effective and reliable information. Depending on certain characteristics some individuals can process this information more easily. Results confirm that individual characteristics, in particular income and education, as well as family characteristics are correlated with Riester ownership. Adding a dynamic element to the analysis I find strong sequential correlations in Riester ownership between siblings. However, these correlations become weaker over time as the number of Riester owners in other social circles grows. Once a critical mass has been reached, positive spillovers can create a social multiplier leading to a higher coverage with private pensions in the future.