Default options and simplified information should be considered to help people make appropriate decisions for their retirement, a new report has said.
In the Organisation for Economic Co-operation and Development’s (OECD) Pensions Outlook 2018, published today 7 December, the body highlighted how low levels of financial knowledge was undermining people’s ability to make decisions, and that more needs to be done so people can take action over their future retirement prospects.
The report highlighted the need to “harness the power of inertia” through initiatives such as automatic enrolment, and advocates default options for people for are unwilling to choose a contribution rate, pension provider, investment strategy or post-retirement product.
OECD principle economist, Pablo Antolin, said: “People’s trust in pensions systems is undoubtedly low. There remains significant concern about whether institutions managing their retirement savings actually have their best interests at heart and will deliver on their promises once they reach retirement age.
“Essentially, pension reforms need to be better communicated so that the rationale and effects of pension reforms become clearer. People need a better understanding of what they themselves can do to secure their retirement incomes, why contributions to all types of pension arrangements are important, which vehicles are available for retirement saving, and how they are protected.”
The report added that clearer pensions statements and a pensions dashboard will also go a long way to improve their retirement prospects.
Furthermore, OECD has called for making costs and charges more transparent in order to “align charges levied with the cost of managing retirement savings.