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Supporting decision-making in retirement planning: Do diagrams on Pension Benefit Statements help?

Published online by Cambridge University Press:  13 February 2019

Féidhlim P. McGowan  and
Peter D. Lunn
Féidhlim P. McGowan*
Affiliation:
The Economic and Social Research Institute, Dublin, Ireland
Peter D. Lunn
Affiliation:
The Economic and Social Research Institute, Dublin, Ireland Department of Economics, University of Dublin Trinity College, Dublin, Ireland
*
*Corresponding author. Email: [email protected]
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Abstract

This paper investigates whether exposure to explanatory diagrams can affect a major financial decision. In a controlled experiment, participants were given Pension Benefit Statements with or without one or two diagrams, before answering incentivised questions that measured recall, comprehension and choice of contribution rate. The diagrams had at best a marginal influence on recall or comprehension. Nevertheless, a diagram relating contributions to income projections prompted more participants to advocate higher contributions, while both diagrams influenced the rationale participants gave for decisions. The implication is that although pension products remain hard to understand, diagrams may alter decisions by reinforcing relevant causal thinking.

Keywords

Decision-makingexperimentinformation disclosureretirement planningC91D14D91
Type
Article
Information
Journal of Pension Economics & Finance , Volume 19 , Issue 3 , July 2020 , pp. 323 - 343
Copyright
Copyright © Cambridge University Press 2019

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