Industry should show people the money to create trust, says scientist
Written by Sunniva Kolostyak
Pension organisations should take advantage of people’s “natural thirst for security” instead of creating uncertainty and fear, as Dutch pensions have become “one great circus of uncertainty” according to a brain scientist.
Speaking at a pension café meeting in Amsterdam by pension fund APB and asset manager APG, brain scientist Victor Lamme said the sector is pushing all the wrong buttons in participants’ brains when communicating about pensions.
He argued that the human brain associate the word pension with negatively charged terms like death, illness and poverty. Furthermore, concepts such as insufficient funding ratio, cuts and indexation scrapping have been added to the mix.
“If you want to restore confidence, you have to play into the healthy level of greed inherent in every human. Show participants what’s in it for them,” Lamme said. “Dutch pensions have become one great circus of uncertainty.”
He named factors such as a rising retirement age, volatile funding rations due to a low interest rate and said a confidence crisis will only deepen, while support for the mandatory pension system will crumble.
“That’s when we’ll be in real trouble, because voluntary pension saving is often put on the back burner.”
To restore trust, Lamme said: “Pension organisations triple participants’ contributions – show people that growing pile of money. The Personal Pension Pot is a step in the right direction, but you can take this concept much further. Have the UPO state: ‘This is the amount you will definitely get, and it could be even more.’”
“After all, doctors tell their patients that they are cured, even though they know there is always a small chance that the illness could return. Pension organisations should not be afraid to put on those big boy pants too, this will help restore consumer confidence.”
Lamme also argued that the pension sector’s attempt to restore trust through full transparency leads to a knee-jerk reaction, as all the explaining is counterproductive.
“If you mention everything, there is always one negative thing among ten positive things – and the negative one will stick around in our brain.”
“Moreover, transparency can work as a perverse incentive. Pension organizations may think ‘I will just put every risk imaginable out there for people to see, at least that way I have informed my participants’,” he said.