The impact of DC (defined contribution) scheme structure and communication policies: a bounded rationality framework

Abstract

Concepts from bounded rationality, particularly biases, are frequently used to explain the successes and the failures of pension scheme defaults. This research suggests that pension literature has focused on pension scheme structure, like defaults, with little attention paid to pension scheme communication designed to persuade and inform. A bounded rationality framework is developed to conceptualise the impact of both structure and communication policies on organisational outcomes, specifically pension participation rates and average contribution rates. It identifies three communication policies to be investigated in future empirical research including individualisation, segmentation and savings rate targets.