Mike Morrison: Pensions and behavioural bias

Overcoming 'mental accounting'

clock • 3 min read

Pension freedom has resulted in people behaving in precisely the way behavioural psychologists would have suggested they would when faced with the choices it entails, writes Mike Morrison

Over the last few years I have become fascinated by how behavioural science interacts with the savings world and the fact we do not act rationally in making financial decisions. Instead, we are subject to certain biases and this is particularly relevant in the retirement process. In the FCA's recent Retirement Outcomes Review, there was one paragraph that caught my eye and which I believe sums up much of what has happened since 2015: "Pension freedoms have switched the mental accounting of (the) pension pot from a future retirement income choice to a current consumption choice." It im...

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