By Linda Jamison

Insight Overview

IDEAS IN THE INSIGHT YOU CAN PUT INTO ACTION

Current trends show that most economically developed countries have seen public and private pension programs move away from defined-benefit plans and toward defined-contribution plans. This shift gives consumers more choices as they make investment choices and plan for retirement. These choices can range from annuity investments that offer guaranteed lifetime income, to flexible accounts that require periodic drawdowns and come with more options. More variety can be an attractive incentive to retirement planning, but the details of individual products can be confusing if consumers do not know how products work or how to weigh the risks and benefits of specific plans. Hazel Batemen and colleagues conducted an online survey of Australian and Dutch pre-retirees aged 50–64 to understand how individuals plan to make retirement benefit decisions once they stop working and to determine whether partial or full annuitization would be more appealing to them. By providing repeated learning opportunities for the participants throughout the survey, the authors were able to draw important conclusions about the factors that might predict whether consumers prefer annuities over flexible pension products.