The preference indicator. An online tool for closing the pension expectation gap

  • Guido Verbaal Guido Verbaal

The Dutch system of pensions is under a lot of pressure. Pension participants now more and more face risks that accompany pension financing. However, many participants are not aware of those risks. Often, they have too optimistic expectations regarding their pension, and their knowledge and involvement is low. As a result, the customer faces a pension expectation gap. In order to close the pension expectation gap, two routes could be followed. First, it could be tried to adjust the expectations of the consumer, which calls for transparent pension communication. Second, pension funds could offer customized collective pension settlements. This will give funds the opportunity to adjust their policy to characteristics and preferencesof the individual participants. Hereby it is required, however, that preferences of the individual pension participants are carefully mapped. The Autoriteit Financiele Markten (AFM) summons the pension sector to come up with initiatives in order to close the expectation gap. This thesis will answer the AFM’s call. With the development of the Preference Indicator, I, on behalf of PGGM, strive for a contribution to closing the gap, in an innovating way. This new online pension tool contributes in two ways. First, the tool adapts to transparent pension communication and; it should provide the participants with more insight regarding choices which affect their pension, and accompanied uncertainties. Second, it offers an opportunity to indicate some individual preferences considering their pension, which is necessary for customization within our pension system. To test whether the Preference Indicator indeed contributes to the problem, an experiment took place among participants of pension fund Zorg en Welzijn. Results show that the PreferenceIndicator improves pension awareness among pension participants. Furthermore, it turns out to be a great instrument to map (risk)preferences of participants.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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