Supporting decision-making in retirement planning: do diagrams on pension benefit statements help? ESRI Research Bulletin 2019/09

McGowan, Féidhlim and Lunn, Pete (2019) Supporting decision-making in retirement planning: do diagrams on pension benefit statements help? ESRI Research Bulletin 2019/09. UNSPECIFIED.

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Abstract

This study used a controlled experiment to test whether explanatory diagrams can improve comprehension of pensions and increase willingness to contribute to a pension. The study was undertaken by the ESRI’s Behavioural Research Unit in collaboration with the Pensions Authority. Central Statistics Office (CSO) figures show that just 36% of 25-34 year-olds in employment have a pension plan. Even workers who do have a plan face replacement rates (income after retirement as a proportion of income before retirement) well below the recommended 70%. International research suggests that failure to understand how pensions work contributes to this picture. Meanwhile, evidence from educational psychology shows that, across multiple areas of learning, comprehension can be improved by diagrams. We therefore tested whether the inclusion of explanatory diagrams on a pension benefit statement (PBS) could, first, improve understanding of how pensions work and, second, increase willingness to contribute to a pension.

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