Monday, 29 October 2007

OECD report on choice and pensions

Yesterday I was banging the drum for the Left adopting behavioural economics as part of the way they address policy. Today I've stumbled across a report just out from the OECD entitled Implications of Behavioural Economics for Mandatory Individual Account Pension Systems.

Some of the information in this will be familiar to some of you I think - namely that providing a large number of fund choices can actually result in less people making an active choice. What I wasn't so clear on was that where choice is severely restricted then the level of active choice shoots up.

It does make you wonder why, for example, Sweden chose to implement a system where savers have literally hundreds of fund options. Another interesting international factoid is the provision of choice in the superannuation system in Australia (see pages 10 & 11 of the report). Industry funds (usually jointly-trusteed with TUs) are the class of superannuation fund most likely to offer fund choices (corporate schemes, surprisingly, the least), but retail funds offer the biggest range of actual options and by some distance.

Anyway, worth a read.

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