Netherlands paper explores people’s trust in pension funds

Workers who expect declining expenses during retirement tend to choose different pension products, a working paper published by the Netherlands Bank says.

Carin van der Cruijsen and Nicole Jonker's paper studies how people's expectations about expenses during retirement and trust in pension funds influence their preferences for different pension arrangements.

The authors find most workers prefer a flat-rate annuity, but there are those who "deviate" and prefer an alternative option: "One of the underlying reasons for preferring a more flexible pattern is an expected shift in expenditure during retirement."

Their paper, Pension profile preferences: the influence of trust and expected expenses, also finds that workers and pensioners who do not trust their pension fund are more likely to prefer a lump sum over annuity-based arrangements.