Framing pension choices

The effect of framing on choosing risk profiles in DC plans after the introduction of a new Dutch pension law

Since September 1st 2016, a law is constituted which enables participants in Defined Contribution schemes in the Netherlands to continue investing their pension savings after pension date. This option was introduced as a way to prevent losses that people faced when receiving a fixed pension income on pension date (due to the dependence on interest rate on pension date and the reduced investment risk in years prior to pension date). The question is how to communicate such new regulations such that participants are activated to look into their pensions and make adjustments as needed.

In two studies with two pension organizations we used four frames to communicate to participants that a new law gave new possibilities and to encourage them to look into their pensions to see if those still fitted their preferences. Information was framed in neutral terms (neutral frame), in terms of what the participant might gain (gain frame), in terms of what losses might be prevented (loss frame) or referring to outcomes or actions of other participants (social frame). The results show that more participants looked into their pensions, and chose to adjust their pensions when the information was framed as a way to prevent missing pension income than in the
other frames.