The Union's pensions supervisory authority advises national and EU policy makers to take account of consumers' behaviour when they set rules for information disclosure on defined contribution (DC) retirement schemes. In a report on good practices in this area, Good practices on information provision for DC schemes', published on 22 February(1), the European Insurance and Occupational Pensions Authority (EIOPA) notes that legal and technical information on this type of pension scheme - which places the full investment risk on members - "has proven not to be effective and can even be counter-productive". Policy makers should take account of people's behaviour when they draw up information disclosure rules for occupational retirement institutions, notes the authority.
This report comes in connection with the revision of rules on the activities and supervision of institutions for occupational retirement provision (Directive 2003/41/EC), proposed by the European Commission in its white paper on pensions, in February 2012.
In defined contribution schemes, the amount of contributions paid to the pension fund is set in advance. However, these are commitments only. Members of such schemes bear the full investment risk. The amount of pensions paid is consequently not known until the time of payment.
"Behavioural economics tells us that, on average, people are not as rational as we might expect them to be. They are not homo economicus,"...