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Suspicious Minds (can be a good thing when saving for retirement)

Author

Listed:
  • A.M.J. Deetlefs

    (School of Marketing, UNSW Business School, UNSW)

  • H. Bateman

    (School of Risk & Actuarial Stidies, UNSW Business School, UNSW)

  • L. Isabella Dobrescu

    (CEPAR and School of Economics, UNSW Business School, UNSW)

  • B.R. Newell

    (School of Psychology, UNSW Business School, UNSW)

  • Andreas Ortmann

    (School of Economics, UNSW Business School, UNSW)

  • Susan Thorp

    (Discipline of Finance, University of Sydney)

Abstract
Faced with an ageing population, governments are shifting the financial responsibility for retirement to their citizens. Employers, too, are shifting this responsibility to employees, with most now offering defined-contribution retirement plans. Yet it is widely acknowledged that consumers do not engage with retirement savings in ways that seem commensurate with what is at stake. Absent and delayed individual decision making has seen government and industry resort to the use of defaults. Given their one-size-fits-all nature, these defaults are unlikely to be optimal for many individuals. Hence getting people interested and involved (or engaged) in their retirement savings remains of high importance. Our research sheds new light on why and how engagement occurs. Engagement is not limited to those interested in retirement saving and does not only grow with the size of the stake. Disengagement does not mean blind acceptance of defaults: many of the disengaged choose non-default investments. Importantly, mistrust in the provider serves as an impetus to monitor retirement investments and to make non-default choices. Implicit trust, by contrast, seems to promote disengagement. Our research suggests that it is time for a customised approach by pension plan providers to address members’ diverse needs and means in terms of time, knowledge and financial resources. We suggest a new role for the “one size fits all” default: that of suspicion arouser.

Suggested Citation

  • A.M.J. Deetlefs & H. Bateman & L. Isabella Dobrescu & B.R. Newell & Andreas Ortmann & Susan Thorp, 2015. "Suspicious Minds (can be a good thing when saving for retirement)," Discussion Papers 2015-06, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2015-06
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2015-6.pdf
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    Cited by:

    1. Geoffrey Kingston & Susan Thorp, 2019. "Superannuation in Australia: A Survey of the Literature," The Economic Record, The Economic Society of Australia, vol. 95(308), pages 141-160, March.
    2. Blake, David & Duffield, Mel & Tonks, Ian & Haig, Alistair & Blower, Dean & MacPhee, Laura, 2022. "Smart defaults: Determining the number of default funds in a pension scheme," The British Accounting Review, Elsevier, vol. 54(4).

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