Putnam Investments says the early results from its new “How Do I Compare” feature, which enables participants in Putnam-administered 401(k) plans to compare their saving and investing progress with the top savers in their peer group, are very encouraging. The results, based on nearly 10,000 workers who have used the feature, found that social comparison helped boost deferral rates by 28%, from 7.5% of annual income to 9.6%. (See “Peer Pressure Could Help Raise Deferral Rates.”)

The Lifetime Income Analysis tool by itself drove strong increases in deferral rates, according to Edmund F. Murphy III, head of defined contribution at Putnam Investments. But the newer social comparison feature is raising rates even more, he tells PLANADVISER. “We’re seeing a lift above and beyond that,” he says. According to the latest figures from PLANSPONSOR’s Defined Contribution Survey, the average deferral rate among active participants is 6.1%.

“It is also an indicator that people are motivated by different things,” he says. “It’s not just how you stack up against the average savers, but how you stack up against the top savers. Our thrust is really around comparing participants to the top savers in their top peer group. That’s what has led to the lift we are seeing.”

Putnam also examines, in addition to top savers in account balance and deferral rate, the key characteristics of top savers. Aside from the numerical data, Murphy says, Putnam makes available to participants information about the other financial habits of these top savers, such as the use of individual retirement accounts (IRAs). “They typically have an outside IRA in addition to a workplace savings plan,” he notes. “They typically are saving for retirement beyond just the 401(k) plan and IRA, using other savings vehicles such as a money market account.”

Another question Putnam asked top savers was how long they intend to work. “Top savers tended to have a longer work horizon than those in the average (savings) category,” Murphy notes.

Murphy says the size of the increase was surprising. “We thought we would see a lift,” he says, “but 28% is a fairly material increase.” Increasing the deferral rate can be a cash flow issue for a lot of people, he points out. They must take money out of current savings in order to save for the future, so the comparisons are clearly more of a motivating factor than he originally thought they would be, he says.

“It’s clear that what gets people to take meaningful action is when you compare them to top savers, not the average of your peer group,” Murphy says. The results show some people trying to move right into the category of top savers. “We provide them with the ability to see what they’ll replace in retirement,” he says. “If you’re saving at 9% or more, you’re typically on track to replace 90% of your income. So that’s a motivator.”

The sooner participants can defer at these levels, the better off they’ll be, Murphy notes. Putnam is in the process of drilling more deeply into the demographics of users that increased their savings and deferral rates, to get a better understanding of this group.

Launched in April, the “How Do I Compare” feature is integrated into Putnam’s Lifetime Income Analysis tool, which projects a worker’s current savings into future monthly income and offers actionable steps to potentially improve outcomes in retirement. The social comparison component enables participants to measure future monthly income trajectory against their peer averages—based on criteria such as age, salary and gender—as well as to the top 10% of savers in each category.

“The early signs are so encouraging we’re going to continue to monitor and track,” Murphy says. “There might be things we can do to make it better and enhance the experience. We’ll continue to let it play out and monitor the results.”

The message Murphy would pass on to plan sponsors is that social comparison works. “It’s a catalyst to get people to take action and to save at rates they otherwise would not have,” he says. When participants have the opportunity to see how they stack up against top savers, they are motivated to reach for a higher bar.