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Pension Plan Decisions

Alistair Byrne (University of Edinburgh Business School, Edinburgh, UK)
David Blake (The Pensions Institute, Cass Business School, London, UK)
Graham Mannion (PensionDCisions Ltd, London, UK)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 21 April 2010

1578

Abstract

We examine the contribution and investment decisions made by members of a large UK‐based DC pension plan. We find that many employees appear to be relatively financially sophisticated and follow approaches consistent with economic and financial theory in terms of savings rates and investment strategies. However, there are also many less sophisticated employees who stick with plan default arrangements and/or follow simple rules of thumb in saving and investing. The challenge for corporate sponsors of pension plans is in designing arrangements and communication strategies that reduce the chances of these less sophisticated plan members making mistakes – in the sense of systematic deviations from optimal behaviour.

Keywords

Citation

Byrne, A., Blake, D. and Mannion, G. (2010), "Pension Plan Decisions", Review of Behavioral Finance, Vol. 2 No. 1, pp. 19-36. https://doi.org/10.1108/19405979201000002

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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