Individual Pension Choices in Uncertain Times: Advancing Digital Support for Risky Pension Decisions

Individuals in the developed economies worldwide increasingly are confronted with an uncertain outlook towards retirement. Consequently, individuals are faced with a greater responsibility in organizing their own pension arrangements. Pension fund managers also face new challenges as their risk-returns decisions for pension investments translate more directly in differences in pension incomes for pension fund participants. In this project, we address three important aspects related to better understanding and supporting risky pension decisions.

They are:
1. Pension participants’ risk-return preferences for pension investments before and after retirement. We address two decision challenges: i) individuals often have multiple investment sources for their retirement income and hence they need to know the impact of decisions per fund on their total retirement income, and ii)
retirement income projections are not necessarily fixed before and after retirement. We investigate the impact of taking an integrated interactive approach to supporting participants with both decisionmaking challenges.

2. Participants’ behavioral evaluation of real options for uncertain future retirement income. As uncertainty increases, individuals need to rely more heavily on flexibly adoptable pension arrangements such as postponing retirement, high-low payments, and continued investments after the legal pension age. Little is known about how individuals evaluate the option value provided by this flexibility.

3. Supporting participant goal setting for uncertain retirement outcomes. With the current uncertainties in how much pension to obtain and when to retire, individuals need to make difficult trade-offs between competing goals. We study participants’ retirement goals and how activating different goals impact their pension decisions.

Read all project publications here.