Retirement plan choices and loss aversion

Consumers continually fail to shop around for the best retirement plan available. The United Kingdom’s Financial Conduct Authority (FCA) conducted an experiment aimed at increasing the amount of options people consider before choosing a retirement plan. Information was provided alongside a pension annuity quote which contained messages taking advantage of loss aversion e.g. “80% of people who fail to switch from their pension provider lose out by not doing so”. All versions of the messages increased ‘shopping around’ by between 8 and 27% among those contacted in the experiment.