Connecting Science and Pension Industry through Knowledge Development and Dissemination

Netspar research provides us insights into the wide range of income and wealth statuses and levels of well-being among older individuals. Recent data about income and wealth provide a detailed picture of the financial position of various groups of older people and the degree to which, for example, pensions and savings determine that position.

This information gives us an ever-better understanding of the differences within and among households and allows us to identify and categorize vulnerable groups. A great deal of work remains, however, in the area of prosperity and welfare in a broader sense.

How do needs and spending patterns change, for example, as people grow older and eventually retire? How might we be able to mobilize the wealth that exists in the form of home equity to meet those needs? And how can we keep healthcare affordable and combine formal and informal care in a sustainable manner?

Pension and retirement decisions require a variety of choices, including about the desired retirement date or form of payout. These are complex decisions that carry a lot of weight in terms of getting it right. After all, suboptimal decisions can affect one’s future standard of living and therefore also have implications for the social welfare system and economic stability.

How do you offer people choices? What are the behavioral aspects that influence pension and retirement decisions? And how much guidance do members need and what is the right balance between digital and person-to-person support?

Pension communication plays a critical role in all this. How can you motivate your members to read up on, and comprehend, pertinent plan information or immerse themselves in their retirement planning? How can pension communication help members understand changes such as those contained in the Future Pensions Act? And what role does pension communication play in terms of members’ level of trust in their pension funds or the government?

Enjoying one’s old age takes comprehensive preparation. That is why in addition to researching the prosperity and well-being of older people, we look at the life stages that precede retirement. During that time, most workers build up pension or retirement savings and some amass wealth in the form of home equity or savings and investments.

If we can coordinate these various “pots”, we increase the chances that our retirement lifestyle will be in keeping with our individual wishes. This holds particularly true in cases where we might need to keep working longer or assume greater responsibility for our healthcare.

Might it be advisable, for example, to grant first-time homeowners more freedom to access their pension savings for a down payment on a house? And could personal savings play a greater role in the future in funding long-term care so as to lessen the burden on government coffers? How can forms of insurance be designed to cover the risk of excessive costs? And can we indeed continue working until a higher retirement age?

Savings, investments and insurance play a vital role in funding people’s retirement. Pension and retirement benefits are determined by the premiums paid, investment returns and risk-sharing agreements. The solidarity of the pension system takes the form of risk-sharing agreements made between plan members and employers and investments in financial markets both incur risk and generate risk premiums.

How can these ingredients be optimally leveraged and combined, and what does “optimal” actually mean? This question is relevant for the pension system as a whole, as well as for the decisions of individual pension providers and plan members.

It is important for pension providers and supervisory agencies to know what plan members’ preferences are. How can you effectively inquire about risk attitudes and sustainability preferences? How do you incorporate these into a collective investment policy? How can you accommodate sustainability criteria and climate-related risks in investments? And what are the most effective forms of impact investing?

The pension provider landscape is diverse. And differences between pension funds, insurers, and pension institutions have both legal and financial ramifications, which means this realm of research also intersects with themes such as governance and communication.

Which considerations are important in designing the governance of pension delivery? How does the role of employers and labor unions relate to that of a collective pension fund? What is a desirable role for the board of a pension fund, relative to the internal and external supervisory bodies? And what type of governance is desirable for insurers and Premium Pension Institutions (PPI’s) that provide supplementary pensions?

Another relevant question deals with the solidarity within a collective pension arrangement and whether it is voluntary or imposed. Which cost solidarity is present in the Future Pensions Act and to what extent is this desirable? What determines people’s trust in pension institutions? And what are the advantages and disadvantages of mandatory participation of employers to sector funds?

Finally, the mandatory participation of individuals is also a quite relevant issue. What are the arguments for and against mandatory participation in a specific pension plan? And what is the best way to minimize the so-called white and gray spots, that is, the retirement-savings gaps for people who are building little or no supplementary pension and retirement savings?