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Substantial improvements can still be made to information provision that is meant to support members in their retirement planning. It is important to note however, that information provision is not a panacea by itself: rather, it should be used in combination with other instruments, including default options and financial education. Also the importance of mandatory pension saving should not be underestimated. EIOPA argues that where not yet applied a new approach to information disclosure is necessary, given the changes in the pension systems throughout the EU.
There is a need to inform people to support them to make the appropriate financial decisions in their retirement planning (chapter 1). Just providing ‘sufficient’ legally and technically relevant information has proven not to be effective, and can even be counter-productive. EIOPA explains that people are no homo economicus, they have limited time and motivation to be involved in retirement planning, and they often use heuristics, which are rules of thumb, to process information quickly.
EIOPA has developed a checklist that is based on the insights from behavioural economics and communication science about how people process information and make financial decisions, but has also collected good practices in the information provision to DC schemes from various Member States. The first and crucial issue on the checklist is that policymakers should only start drafting information requirements if they have thought through the behavioural purposes: what should people be able to ‘do’ with the information? If information directly serves certain actions and financial decisions in the financial planning it is more effective.
Gabriel Bernardino, Chairman of EIOPA, said: “Evidence shows that we need a new approach to information disclosure. This Report highlights how information can be structured and presented to help scheme members to make appropriate financial decisions. I do hope that this Report will encourage those responsible for pension scheme communications to provide clear, member-friendly and comprehensible information that guides and supports European citizens in effective retirement planning.”
Q&A with Gabriel Bernardino on the Report