Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals’ side in building an efficient portfolio for retirement. In this paper we provide a model describing workers’ choices on the allocation of retirement savings in presence of a) mandatory pension contribution; b) different pension plans; c) information costs and financial literacy investment decisions. In particular, we characterise the results from both a positive and normative standpoint, by highlighting the determinants of individuals’ choice, with special focus on information costs, on the role of income and preferences, and by characterizing the optimal contribution rate to mandatory complementary pension plans. We also introduce endogenous financial literacy and analyse how its optimal level is determined and how it affects the decisions on pension plans. This article is protected by copyright. All rights reserved.