Suspicious Minds (can be a good thing when saving for retirement)

Retirement saving is an area now jam-packed with defaults meant to address delayed or absent decision making. Yet, getting individuals engaged with retirement saving decisions is critical to avoid unsuitable one-size-fits-all defaults and optimise accumulated wealth. We apply a market-segmentation approach to the problem based on two attitudinal motivators of behavioral engagement: trust and interest.

Our research sheds new light on why and how engagement occurs. Engagement grows with interest, yet engagement can also be motivated by low levels of trust. However, when interest is lacking, trust is related to reducing monitoring behaviour. This increases the vulnerability of individuals to exploitation exposing the “dark side of trust” (Gargiulo and Ertug 2006). Based on this interaction of trust and interest and how it feeds into engagement, a personalised approach by pension plan providers that addresses members’ diverse needs and means in terms of time, knowledge, and financial resources seems desirable.

Keywords: pension defaults, trust, engagement, retirement savings

JEL Classification: J26, J32

Suggested Citation: Suggested Citation

Deetlefs, J. and Bateman, Hazel and Dobrescu, Loretti Isabella and Newell, Ben and Ortmann, Andreas and Thorp, Susan, Suspicious Minds (can be a good thing when saving for retirement) (September 8, 2015). UNSW Business School Research Paper No. 2015-06A, Available at SSRN: https://ssrn.com/abstract=2575482 or http://dx.doi.org/10.2139/ssrn.2575482