The pensions landscape is undergoing a revolution. Dramatic policy moves, demographic shifts and economic effects mean future retirees will face a new retirement horizon, unrecognisable today. Many savers are unequipped to make the decisions needed to maximise their prospects for good retirement outcomes.
Although much of the future direction is unpredictable what is certain is that future retirees will bear more risk at and during retirement than previous generations. Therefore it lies with policy-makers, industry and those with an interest in helping pension savers, to ensure that support and safety nets exist for those who find navigating such decisions challenging.
Sponsored by international law firm Pinsent Masons, the Pensions Policy Institute (PPI) releases the first report in its three-part Consumer Engagement series, Engagement: barriers and biases. The project, the first ever to look at consumer engagement, explores the role that consumer engagement can play in providing better outcomes for people in retirement.
The report considers the behavioural factors and systematic biases that impact retirement saving decisions and the way that people currently engage with financial services. Focusing on insights from behavioural economic theory, it draws out the lessons that these insights might have for pensions.
Carolyn Saunders, Head of Pensions and Long-Term Savings at Pinsent Masons said:
"More savers with greater flexibility inevitably means that the way in which people access and use savings in retirement will change. There is uncertainty about the exact direction that changes will take as there are many factors that will influence this. Not least, the behaviour of individuals and the choices they make, will affect the aggregate value of savings and the retirement income products on offer."
Lauren Wilkinson, Policy Researcher at The Pensions Policy Institute added:
“With the automatic enrolment review focussing on consumer engagement as a key theme, it is important that policy takes account of the way that individuals naturally behave when considering how to further improve retirement outcomes. Using behavioural techniques in a pension environment is not straightforward. But if used alongside a range of other policy levers there is evidence to suggest that behavioural techniques can improve decision-making and outcomes.”
Further reports in the Consumer Engagement series will explore the ways in which people engage currently and how behavioural interventions might work alongside other policy levers to help people to achieve better outcomes from pensions; as well as exploring policies designed to promote engagement internationally and draw out lessons for promoting better engagement in the UK.
The project is sponsored by Pinsent Masons and The Association of British Insurers (both major sponsors) and the Institute and Faculty of Actuaries, State Street Global Advisors, the Universities Superannuation Scheme, LV=, The People's Pension, The Pensions Regulator and The Pensions Advisory Service.