HMN 2025: How Most of us miss out on financial opportunities

Passivity in financial choices is not due to specific personality traits—but depends on the context. This is the conclusion reached by researchers from CEBI and Danmarks Nationalbank in a new study.

Are people who fail to adjust their pension contributions in response to policy reforms the same people who refinance their mortgages when interest rates fall? The answer is clear: They are.

“We find a striking independence between the decisions. People who are inactive in relation to pensions are not systematically inactive when it comes to mortgages. The systematic component is close to zero,” says Claus Thustrup Kreiner, professor and head of CEBI.

He is one of the authors of a new study based on comprehensive Danish administrative data that analyzes two major financial decisions: adjustments to pension contributions following reforms in 2010 and 2012, and the refinancing of fixed-rate mortgages in the period 2009–2016, when interest rates fell significantly.

Difficult to target interventions

The results show that 79% of homeowners with a clear incentive to refinance their loans did not do so, and 65% did not respond to the pension reforms. Yet, there is no strong correlation between the two types of inaction.

“This means that the economic losses from inaction are not concentrated in a specific group but are spread widely across the population. This makes it difficult to target interventions at specific individuals,” explains Søren Leth-Petersen, professor at CEBI and the Department of Economics.

The researchers estimate that a typical household loses around 3% of its annual disposable income in the first year if it does not respond to the incentives. Over several years, the cumulative loss can be substantial.

Calling for a new approach

The researchers also analyzed whether inactivity is more systematic within the same context. Here, the data show consistency in pension decisions.

Around thirty-five percent of the variation in responses to the two reforms is due to individual differences. However, this systematic pattern does not extend across pension and mortgage decisions.

“Our results indicate that context matters more than personal characteristics. It is the specific decision-making situation that determines whether people act,” says Leth-Petersen.

He and the other authors argue that the findings call for a new approach.

“If passivity is not driven by stable personal traits, it is not possible to target campaigns at specific groups. Instead, the focus should be on making decisions simpler and more salient,” suggests Thustrup Kreiner.

The study is a working paper titled “Are people systematically inactive across financial decisions? Linking evidence from mortgage and retirement saving decisions.”

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