Schemes are increasingly taking action to manage longevity risk through risk settlement actions, with bulk annuity and longevity swap transactions covering over £25bn of trust-based pension scheme liabilities in 2018.
As this trend is continuing to grow, Aon commissioned research with behavioural science experts Behave London, looking into perceptions on pension scheme de-risking. This research identified that many trustees and sponsors had a lack of clarity on de-risking and the processes required, and also greatly evident were behavioural biases which acted as barriers to being better informed and able to make better decisions.
You can read the full report and step by step guide to help schemes better navigate the de-risking market here. We have also summarised the key highlights from the research into 4 short engaging podcasts below.
In this first podcast, Aon's Karen Gainsford speaks to Behave London's Hannah Lewis who shares the key findings from our research.
People have a strong tendency to want to stick with the status quo, the current way of doing things. Anything which involves change or disruption is uncomfortable for our brains.
In this podcast Behave London’s Hannah Lewis shares insights on how to break this mental deadlock and avoid getting trapped in the status quo. Aon Partner Mike Edwards shares insights from a de-risking context, and how schemes can challenge the status quo and successfully remove longevity risk.
People suffer from regret aversion, in that they do not want to make a decision which may prove to be a mistake — and one they regret. Trustees and sponsoring employers may have reservations about taking action to reduce risk in case the risk never materialises. In this podcast Behave London’s Hannah Lewis shares insights on how to look at this bias in a different light, and Aon Partner John Baines gives insights on where pension schemes can encounter risk aversion, and measures on how to mitigate it.
Once you start getting towards the business end of a transaction, you are not immune from behavioural biases. How do you assess pricing and make the decision of whether to proceed? How do you assess different providers?
In this podcast Behave London’s Hannah Lewis shares insights on how to look beyond the pain of paying and being attracted to familiar brands, and Aon’s Head of Risk Settlement Martin Bird shares experiences from the perspective of pension schemes.