What information do people need about pensions? 16/07/2014 What information do people need about pensions? Daniela Silcock, Head of Policy Research, Pensions Policy Institute TUC conference - People and pensions: a decent retirement age for all 1 February 2017 www.pensionspolicyinstitute.org.uk

What information do people need about pensions? The type of information that people need depends on policy and personal circumstances Information needs vary through the life course Not everyone has the ability to use information Other policy levers are important for achieving positive pension outcomes

Circumstances affect required level of information 16/07/2014 Circumstances affect required level of information Defaults or compulsion – automatic enrolment Scheme type – DB, DC; master trust, GPP Employer approach – contribution level, communications, scheme choice

What information do people need about pensions? The type of information that people need depends on policy and personal circumstances Information needs vary through the life course Not everyone has the ability to use information Other policy levers are important for achieving positive pension outcomes

Childhood How does the economy work? How do I manage my own money? 16/07/2014 Childhood How does the economy work? How do I manage my own money? What is a pension? Should I save? How does one juggle competing financial priorities?

Young adulthood Should I opt-out of my pension or stay in? 16/07/2014 Young adulthood Should I opt-out of my pension or stay in? Should I opt-in or find some other form of provision? What is my aim? How much should I save? What can I expect from my employer?

Adulthood How will I support retirement? When might I retire? 16/07/2014 Adulthood How will I support retirement? When might I retire? Am I on track to meet my retirement goals?

Approaching retirement 16/07/2014 Approaching retirement When and how will I leave work? How will I support myself in retirement? Am I hedging against inflation and longevity risk? Do I have dependents who require support? Might I have care needs soon myself? How can I determine whether someone is a fraudster?

At and during retirement 16/07/2014 At and during retirement When and how am I retiring? What is my eligibility for and how can I take State Pension/state benefits? How do retirement income products work? What is the potential impact of longevity, inflation, market turbulence and the need for care on my future income?

What information do people need about pensions? The type of information that people need depends on policy and personal circumstances Information needs vary through the life course Not everyone has the ability to use information Other policy levers are important for achieving positive pension outcomes

People receive different levels of information and guidance offers during the life course School and workplace Scheme communications Other guidance – the Pensions Advisory Service, Money Advice Government – communications about state pension, Pension Wise Pre-retirement statutory communications – wake up pack Media

Information, guidance and advice can help people to make more informed decisions Financial education (formal and informal) improves financial capability Discussing retirement issues with peers clarifies risks and options for people People respond well to media campaigns and to free guidance (if offered at the right time)

Internal and external factors influence work and retirement transitions Transitions can be involuntary, particularly among people of lower socio-economic classes “Decisions” can be influenced by internal and external factors: Affective (emotional/feeling) factors Behavioural factors Attitudes towards external stakeholders Structural factors

Not everyone has the ability to understand and use information Skills and knowledge necessary to make an informed decision about accessing DC savings What options are available Longevity risk Potential future needs incl. health/social care Economic factors: Inflation Market risks and returns Understanding of compound interest (and charges)

Numeracy is correlated with the ability to make “good” pension decisions Numeracy levels are low in the UK. Among UK adults: Around 4 in 5 adults have a low level of numeracy (below GCSE grade C level) Nearly one in five people cannot correctly identify the balance in a bank statement A third of adults do not understand the impact of inflation on purchasing power

Cognitive ability and strength of behavioral barriers change over the life course Younger people have higher cognitive ability and are more able to learn and adapt as a result of receiving information Behavioural barriers and biases strengthen over time and experience Cognitive barriers grow stronger during older ages

What information do people need about pensions? The type of information that people need depends on policy and personal circumstances Information needs vary through the life course Not everyone has the ability to use information Other policy levers are important for achieving positive pension outcomes

Other policy levers are important For those with low levels of financial capability or cognitive barriers, defaults, compulsion (and safety nets) will play a significant role in ensuring positive outcomes – (e.g., automatic enrolment) Complex lessons in economics may be unhelpful for those who are not very engaged Regulation and governance will need to ensure protection for those with varying degrees of financial capability, against high charges, fraud and other potential sources of detriment