a crisis of unpreparedness & the role of financial literacy
cork university business school
in association with investanalitix
hayfield manor, cork
may 24, 2018
andrew nugent, pensions authority of ireland
professor niall o'sullivan, cork university business school
zola sookias, investanalitix
"when millions of educated consumers make good personal financial choices, our economy is strengthened in fundamental ways"
Roger Ferguson, Federal Reserve Board Vice Chairman, 2002
"by every measure, and in every sample we have examined, we conclude that financial literacy is a key determinant of retirement planning"
Researchers Annamaria Lusardi & Olivia Mitchell
Corporate pension plan sponsors often lament that members lack adequate investment knowledge and understanding. Consequently, many fail to plan sufficiently for retirement and are poorly prepared for it.
Worldwide, one-in-three workers will face an income shortfall of 50% or more during their “golden years”. In Ireland, the picture is much the same: Only a quarter of the working population is saving for retirement through a private pension and almost half see the State as a benefactor.
Despite these realities, few companies offer flexible and practical investment education as part of their pension benefit package, even though a considerable number of employees desire it.
From a regulatory perspective, investment education is deemed mandatory for pension plan trustees but not for plan members who must fight the retirement battle in the trenches where arguably they need the knowledge most.
Why are formal investment education and financial literacy initiatives not seen as essential components of a corporate pension package? Can investment education increase member participation and engagement? Can improved financial literacy engender greater retirement readiness in the working population? What strategies can corporations adopt to address this issue? How can companies best structure their pension benefits’ package to cater to disparate plan member needs?
This seminar will examine the crisis of retirement unpreparedness and provide answers to these questions by considering several factors, including:
The monetary cost of financial illiteracy
Impact of the “rent-seeking” behaviour of the financial services industry
Diverse behavioural profile of plan members
Limitations of standardised pension plan offerings and the benefits of customisation
Deficiencies of “one-size-fits-all” investment education resources
Need for a regulatory framework for consumer investment education
Role of financial literacy in empowering individuals to take charge of their financial future
Benefits of government-level national campaigns for awakening public consciousness