Save More Tomorrow, or SMarT, is a pension programme designed by Richard Thaler and Simon Benartzi. The programme has four main features. To overcome hyperbolic discounting, employees are approached about increasing their pension contribution rates, considerably before a scheduled pay increase. If employees join the program, the contribution is increased with the first pay check after the pay rise to mitigate the perceived loss aversion of a cut in take home pay. Employees are defaulted to continually increase their contributions with each pay rise, inertia and status quo bias work to keep people in the plan, however they are free to opt-out at any time. The SMarT plan takes precisely the same behavioral tendency that induces people to postpone saving indefinitely (i.e., procrastination and inertia) and puts it to use. Think about this policy in terms of the FORGOOD framework.

The below interpretations of the seven considerations are suggestions and different people will think of these differently.

Does the behavioural policy have undesired redistributive effects?

No. The behavioural policy does not focus nor neglect one group in favour of another. It does not lead to a subset of the population behaving against their best interests. All employees were approached about joining the programme. The contributions begin with a pay rise, so no individual is worse off.

Is the behavioural policy open or hidden and manipulative? 

The policy is transparent. Employees are approached about the programme and asked to join, they are given the chance to scrutinise the programme. The programme also auto-enrols people into continuing to increase their contributions which can be viewed as non-transparent, but the option of opting-out is always available to the employees.

Does the policy respect people’s autonomy, dignity, freedom of choice and privacy?

It can be argued that enlisting the status quo bias through defaulting people into gradually increasing their pension contributions is a violation of the autonomy of the employees. However, given that employees have the freedom to choose to enlist in the programme and to opt-out at any point, their autonomy is maintained.

Does the behavioural policy serve good and legitimate goals? 

The behavioural intervention serves goals that are ethically acceptable and aims to improve people’s lives: increasing the value of people’s pension savings.

Do people accept the means and the ends of the behavioural policy? 

Public opinion of the SMarT plan is favourable, the participation rate is generally quite high. People who wish to sign up do so, and opt-out at any time they want. There appears to be agreement with both the ends and the means of the policy among the nudgees which lends strong justification for the nudge.

Do better policies exist and are they warranted? 

There are other policy options available however this behavioural policy has been show to effectively increase the savings of employees. In the US, take-up has been widespread, with the FT reporting its use in 2012 by 60 per cent of American companies. This behavioural policy appears to be relatively more effective compared to other options.

Do the policy-makers have the right and the ability to nudge using the power delegated to them? 

The policy-makers have no conflicts of interest in implementing this nudge. The opt-out behavioural intervention was designed using a strong scientific base and will be implemented by policy-makers who have the competency to administer and evaluate the behavioural policy properly.