Weiss-Cohen, Leonardo, Ayton, Peter, Clacher, Iain and Thoma, Volker (2022) Pension scheme trustees as surrogate decision makers. Finance Research Letters, 44, p. 102043. ISSN (print) 1544-6123

Abstract

Pension trustees make surrogate decisions on behalf of scheme members. However, prior research has not explored how this might affect pension adequacy. Our results show that when setting targets for pension replacement income, trustees project their own preferences instead of reflecting member preferences. Furthermore, projection was more pronounced for trustees with lower financial literacy. Trustees choose significantly higher pension replacement rates for members than members choose for themselves. Trustees also choose replacement rates higher than current benchmarks. The economic consequences are potentially considerable, due to high levels of pension contributions and incompatible risk-taking. A better understanding of the dynamics of decisions made by trustees is needed to ensure better member outcomes.

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Official URL:	https://doi.org/10.1016/j.frl.2021.102043
Item Type:	Article
Uncontrolled Keywords:	Behavioral finance; Decision-making; Financial literacy; Pensions; Surrogate decisions; Trustees
Research Area:	Research Areas > Economics and econometrics
Faculty, School or Research Centre:	Faculty of Arts and Social Sciences Faculty of Arts and Social Sciences > School of Law, Social and Behavioural Sciences
Date Deposited:	24 Nov 2021 15:59
Last Modified:	26 Sep 2022 10:23
DOI:	https://doi.org/10.1016/j.frl.2021.102043
URI:	https://eprints.kingston.ac.uk/id/eprint/50508

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