Well done to Darren Philp of People's Pension for the excellent presentation at this week's Pension Age Conference. He spoke on reasons people make the wrong decisions. So with some commentary of my own, here's hoping I was listening properly:
1. Present Bias
This is simply the feeling that I can have the money now, take it out, use it, not save it.
2. Ostrich Effect
Head in the sand and the pension decisions may go away.
3. Optimism Bias
I really won't need to save that much as what I have will bring in loads of interest. Alternatively... I really won't need much in retirement...
4. Complexity Aversion Bias
Too much choice! What to do? Nothing.
5. Bandwagon Effect
What's everyone else doing? That must be right....
6. Confirmation Effect
Can someone please confirm what's best for me? Just tell me what to do!
The solution to these issues lies in clear communication at a simple level, good 'defaults' and a good deal of persistence from the employer/provider!
1. Present Bias
This is simply the feeling that I can have the money now, take it out, use it, not save it.
2. Ostrich Effect
Head in the sand and the pension decisions may go away.
3. Optimism Bias
I really won't need to save that much as what I have will bring in loads of interest. Alternatively... I really won't need much in retirement...
4. Complexity Aversion Bias
Too much choice! What to do? Nothing.
5. Bandwagon Effect
What's everyone else doing? That must be right....
6. Confirmation Effect
Can someone please confirm what's best for me? Just tell me what to do!
The solution to these issues lies in clear communication at a simple level, good 'defaults' and a good deal of persistence from the employer/provider!
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