A major new report into the decision making processes of pension trustees is published today. Pension Trustee Decision Making is the culmination of a two year programme commissioned by the IFoA’s Actuarial Research Centre, which explores the potential for and types of biases that may be present in pension trustee decision making.

Despite extensive training, and displaying higher financial literacy than a lay person, trustees are not immune from decision biases, in particular when comparing member-nominated trustees with professional trustees. A multidisciplinary team of researchers from City, University of London, IPSOS, Reverence Limited, University of Leeds and University of East Anglia used a combination of experimental and qualitative research techniques to investigate the challenges facing trustees. The report draws on a review of existing psychology and behavioural economics literature and offers a number of recommendations to help trustees and boards in their decision making.

Sejal Haria, Co-chair of the IFoA’s Actuarial Research Centre’s Behavioural Finance Steering Group


“This rigorous multidisciplinary academic study of judgment and decision making processes in pension trustees has identified some important themes that could have a detrimental impact on the quality of trustee decision making and therefore on a pension scheme itself.  This includes cognitive overload from the volume of information presented to trustees, the use of consensus decision making and the lack of diversity within trustee board membership.”

Mark Williams, Chair of the IFoA’s Pensions Board


“The research adds to existing calls for greater professionalism for pension trustees.  However, fully achieving this may require careful consideration and further research. While it would be unrealistic for all trustees to undergo extensive training to gain deep expertise in all the matters they oversee, there is a case for improving the collective efficacy of trustee boards. The rise of DC pensions also means there is a need to consider extended skill sets on trustee boards– in particular the development of two-way communication with employees.”

For more information about this ARC Programme and its other outputs, visit the IFoA website at ARC/ Behavioural Finance