A life expectancy calculator provided by the UK's pension guidance service could be influencing users' financial decisions, research has found.
A paper published last week (November 27) by David Comerford and supported by Jenny Robinson, both from the Behavioural Science Centre at the University of Stirling, found savers were more likely to take out cash than an annuity after using the Pension Wise tool, now part of the Money and Pensions Service.
The reason was that by encouraging people to calculate their likely life expectancy, the website is effectively asking people to face their own mortality, it stated.
The study, which involved more than 2,000 participants, showed people completing the life expectancy calculator were far more likely to choose the lump sum option as a result.
Dr Comerford said: “The UK pensions market has undergone significant change in recent years, with the public now faced with a wider range of choice around a subject which is often perceived as difficult to understand and [not] particularly interesting.
“While the government’s Pension Wise website seeks to provide information to assist people, the failure to adequately test the effects of the content and tools on the site, such as the life expectancy calculator, has created an unintended bias.
“Supported by our research findings, it is our recommendation that all such advisory sites and tools are adequately tested on an experimental basis before being fully launched to the public and, in the meantime, that the life expectancy calculator is removed from the Pension Wise website.”
Midge Clayton, insight lead at Maps, has rebuffed the research, noting the study “gave people a stark choice between just two options - buying an annuity and taking cash”.
“This is a poor simulation of real life, as it ignores the popular option of arranging a drawdown facility," he said.
He added: “Guidance involves discussing a range of choices, and people are highly unlikely to visit the single page on the Pension Wise site that deals with the specific issue of life expectancy in isolation, before choosing their pension access option.”
Mr Clayton also noted that data from the Financial Conduct Authority contradicted the research results, since it found that people using Pension Wise guidance “were actually more likely to choose the annuity option and less likely to choose the cash options offered in the experiment, than those not using any guidance or advice.”
maria.espadinha@ft.com
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