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

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.