“The way pension risks are visualized shapes how participants understand, value, and make choices in the risk preference assessment”

 

What is the focus of the paper?

This paper examines how participants experience different visualizations used in the risk preference elicitation (RPE), which pension funds are required to conduct under the Dutch Future Pensions Act. In a qualitative study, thirteen participants were interviewed while using three types of visualizations: a three scenario bar chart, a pension builder, and a fan chart. For the fan chart an experience sampling step was added, whereby participants were shown twenty semi-randomly pension outcomes individually prior to making their choice. All participants assessed all visualizations and selected an risk profile from nine options. Semi structured interviews with think aloud protocols were used to capture participants’ interpretations and considerations. The study explores the potential for improving the RPE, with specific attention to the mrole of visualisations, and does not aim to measure differences in risk preferences across visualisations.

 

What are the key findings?

The interviews show that preferences for visualizations vary widely; no single visualization is preferred by all participants. Accompanying texts are often read only partially, which can lead to confusion when visualizations are not self explanatory. Presenting nine risk options simultaneously is experienced by some participants as overwhelming and complicates decision making. Younger participants find the RPE more difficult because they struggle to interpret long term outcomes and future needs. The applied form of experience sampling is not intuitive for most participants and does not appear to support decision making process.

 

What are the implications?

  • Pension funds should take heterogeneous preferences for visualisations into account and, where possible, tailor visualizations to different participant groups.
  • Visualizations should be largely self explanatory, as explanatory texts are often not fully read.
  • Reducing or restructuring the number of choices can make the RPE easier to complete.
  • Further research is needed before experience sampling can be effectively applied in the RPE.