City Research Online

Pension Plan Decisions

Blake, D., Byrne, A. and Mannion, G. (2010). Pension Plan Decisions. Review of Behavioural Finance, 2(1), pp. 19-36. doi: 10.1108/19405979201000002

Abstract

We examine the contribution and investment decisions made by members of a large UKbasedDC pension plan. We find that many employees appear to be relatively financiallysophisticated and follow approaches consistent with economic and financial theory in terms ofsavings rates and investment strategies. However, there are also many less sophisticatedemployees who stick with plan default arrangements and/or follow simple rules of thumb insaving and investing. The challenge for corporate sponsors of pension plans is in designingarrangements and communication strategies that reduce the chances of these less sophisticatedplan members making mistakes – in the sense of systematic deviations from optimalbehaviour.

Publication Type: Article
Publisher Keywords: Pensions, Defined contribution, Contribution rates, Investment choice, Behavioural biases
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17361
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