Daniela Silcock, Head of Policy Research, Pensions Policy Institute

1. What information do people need about pensions? Daniela Silcock, Head of Policy Research, Pensions Policy Institute TUC conference - People and pensions: a decent retirement age for all 1 February 2017 www.pensionspolicyinstitute.org.uk

2. What information do people need about pensions? • The type of information that people need depends on policy and personal circumstances • Information needs vary through the life course • Not everyone has the ability to use information • Other policy levers are important for achieving positive pension outcomes

3. Circumstances affect required level of information • Defaults or compulsion – automatic enrolment • Scheme type – DB, DC; master trust, GPP • Employer approach – contribution level, communications, scheme choice

4. What information do people need about pensions? • The type of information that people need depends on policy and personal circumstances • Information needs vary through the life course • Not everyone has the ability to use information • Other policy levers are important for achieving positive pension outcomes

5. Childhood • How does the economy work? • How do I manage my own money? • What is a pension? • Should I save? • How does one juggle competing financial priorities?

6. Young adulthood • Should I opt-out of my pension or stay in? • Should I opt-in or find some other form of provision? • What is my aim? • How much should I save? • What can I expect from my employer?

7. Adulthood • How will I support retirement? • When might I retire? • Am I on track to meet my retirement goals?

8. Approaching retirement • When and how will I leave work? • How will I support myself in retirement? • Am I hedging against inflation and longevity risk? • Do I have dependents who require support? • Might I have care needs soon myself? • How can I determine whether someone is a fraudster?

9. At and during retirement • When and how am I retiring? • What is my eligibility for and how can I take State Pension/state benefits? • How do retirement income products work? • What is the potential impact of longevity, inflation, market turbulence and the need for care on my future income?

10. What information do people need about pensions? • The type of information that people need depends on policy and personal circumstances • Information needs vary through the life course • Not everyone has the ability to use information • Other policy levers are important for achieving positive pension outcomes

11. People receive different levels of information and guidance offers during the life course • School and workplace • Scheme communications • Other guidance – the Pensions Advisory Service, Money Advice • Government – communications about state pension, Pension Wise • Pre-retirement statutory communications – wake up pack • Media

12. Information, guidance and advice can help people to make more informed decisions • Financial education (formal and informal) improves financial capability • Discussing retirement issues with peers clarifies risks and options for people • People respond well to media campaigns and to free guidance (if offered at the right time)

13. Internal and external factors influence work and retirement transitions • Transitions can be involuntary, particularly among people of lower socio-economic classes • “Decisions” can be influenced by internal and external factors: • Affective (emotional/feeling) factors • Behavioural factors • Attitudes towards external stakeholders • Structural factors

14. Not everyone has the ability to understand and use information • Skills and knowledge necessary to make an informed decision about accessing DC savings • What options are available • Longevity risk • Potential future needs incl. health/social care • Economic factors: • Inflation • Market risks and returns • Understanding of compound interest (and charges)

15. Numeracy is correlated with the ability to make “good” pension decisions • Numeracy levels are low in the UK. Among UK adults: • Around 4 in 5 adults have a low level of numeracy (below GCSE grade C level) • Nearly one in five people cannot correctly identify the balance in a bank statement • A third of adults do not understand the impact of inflation on purchasing power

16. Cognitive ability and strength of behavioral barriers change over the life course • Younger people have higher cognitive ability and are more able to learn and adapt as a result of receiving information • Behavioural barriers and biases strengthen over time and experience • Cognitive barriers grow stronger during older ages

17. What information do people need about pensions? • The type of information that people need depends on policy and personal circumstances • Information needs vary through the life course • Not everyone has the ability to use information • Other policy levers are important for achieving positive pension outcomes

18. Other policy levers are important • For those with low levels of financial capability or cognitive barriers, defaults, compulsion (and safety nets) will play a significant role in ensuring positive outcomes – (e.g., automatic enrolment) • Complex lessons in economics may be unhelpful for those who are not very engaged • Regulation and governance will need to ensure protection for those with varying degrees of financial capability, against high charges, fraud and other potential sources of detriment