The European Insurance and Occupational Pensions Authority (EIOPA) has published today its Report on Good Practices related to the provision of information for Defined Contribution (DC) schemes. The Report is part of EIOPA own-initiative work. It is addressed to policymakers responsible for information disclosure to pension scheme members.
In its study EIOPA calls for a new approach to information disclosure in the context of the changes being made to pension systems throughout the EU. EIOPA believes that there is a growing need to support people to make effective financial decisions in their retirement planning by providing information focused on behavioural purposes. ‘Just providing “sufficient” legally and technically relevant information has proven not to be effective, and can even be counter-productive’, as stated in the Report.
EIOPA explains that people are usually not homo economicus: they try to reduce complexity, use rules of thumb, are prone to bias when making decisions, are unrealistically optimistic, let short term interests prevail over the long-term and have limited self-control to save for later. The study argues that in order to be effective, information needs to take these human characteristics into account.
The Report contains a checklist based on insights from behavioural economics and communication science about how people process information, and presents examples of good practices for providing information that are already in place in various Member States.
The Report also makes an important point that providing effective information alone, is not a panacea. It should be used in combination with other tools, such as financial education, default investment funds and possible mandatory approaches.
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