The Pension Blueprint podcast video transcript 

Episode 9 Transcript

Celine Chiovitti · Thomas Post · Martin Diokno 

0:00 Introduction 

Celine: Welcome to the Pension Blueprint. I'm Celine Chiovitti, Chief Pension Officer at OMERS and your host. Retirement planning is one of those things many of us know we should think about, but it's easy to put off. So what can we do to feel more confident about our financial future? Today I'm joined by Dr. Thomas Post, a behavioural scientist and Associate Professor of Finance at the Maastricht School of Business and Economics, and Martin Diokno, Associate Director of Pension Education and Relationship Management at OMERS. Together we'll explore why we put off financial decisions, what actually helps people engage with their pension and how small steps today can build lasting confidence. 

Celine: So let's get into it. 

Celine: Hello, Thomas and Martin, welcome to the Pension Blueprint. 

Martin: Thank you for having me. 

Thomas: Thank you so much. 

Thomas: Thank you for inviting me. 

Celine: I am really excited to have this conversation about retirement and pension and preparing for retirement, which I think is something we all need to start thinking about. And maybe I would just get some background from each of you. Thomas, if I start with you, your background is in behavioural science. So talk a little bit about that, what it means in practice and how you apply that to finance and pensions. 

Thomas: Yes, so my, actually the background - my background is more like classical finance. So it's like dream worlds of the rational agent optimizing stuff. 

Thomas: And then when I moved to Maastricht University, I started to work with real data, how retail traders behave. And I quickly realized now that's not at all what rational models would predict. 

Thomas: So from there onwards, I started to dive into behavioural science. I work with people from marketing, psychologists, to try to understand and model how real people behave. And based on that, also to think about, if you realize they make weird decisions, how can we help them with all the toolbox that behavioural science offers us? 

Celine: I mean, there's so many things I want to ask you. So I'm going to come back to that because I think that's like, how do you, what does it say in the lab versus in practice after sort of seeing so many people and how they make their decisions? 

Celine: Martin, how about you? You've spent your career serving members and talk a little bit about the work that you do. 

Martin: So what I lead is our pension education teams at OMERS. I lead the Road Warriors and it's a very rewarding job because we actually go and speak to our members and we listen to their real problems and we help them figure out whatever it is they need to figure out. 

Martin: What's kind of cool about my job is that really the office is wherever our members are, wherever our employers are. So we're always with our people. 

Celine: Yeah. And so you've, I mean, met with thousands and thousands of members, very diverse backgrounds, different levels of education, different stages in their life. What are some of the things that surprise you about how they approach retirement planning? 

Martin: You know, a funny thing about retirement is that a lot of people think that it's something that someone's always looking forward to. What surprised me at the onset of my career was meeting people that were really worried about retirement, the uncertainty. They viewed it as the beginning of the end. 

Martin: And obviously the narrative has changed significantly over the years. A lot of the work that we're doing in educating our members, but that's been one of the big things that really was surprising in speaking to our members. 

Celine: Yeah. 

3:53 Making Pensions Easier to Understand 

Celine: I feel like there's so much information available to people today, which on the one hand is great. You have access to sort of almost a lot of free information through social media, but it's also a lot of noise and overload. And so, Thomas, maybe to you, how do we make that easier? Is there such a thing as too much information in this space? 

Thomas: Hmm, when it comes to pensions, the answer is very easy. It's yes. I mean, it is inherently - it's a very complicated topic. 

Thomas: The issue is we are surrounded in our work careers by people that do understand pensions. That's the issue, and that the people we are dealing with that we are trying to provide a pension for, they're not like us. They're just normal people. Then pension is not on top of their mind. 

Thomas: And I mean the information you would need to make a proper plan yourself. It's about life tables. It's about discounting. It's about asset management. I mean, come on, who seriously understands these issues? There's no need to understand these issues. I mean, they're just complicated things that are stuff for experts. 

Thomas: So I would say yes, more information is not needed. It is complicated. 

Celine: Yeah. So what are some of the strategies then, Martin, that people should like, how do you get people to think about the right things to focus on? 

Martin: Yeah, and that's exactly it. There's too much information, like Thomas said. People are quite averse to complexity. So what my team does is we're really translators. That's our job. We turn complex pension language into English. 

Martin: And what we also try to understand is the individual member as best as we can. What might be important to someone who's 25 will be very different to someone who's 40 to someone who's 60 who's getting closer to retirement. So there's that human element, but then we also work very closely with our comms teams changing the narrative of the pension as a distant benefit. 

Martin: You know, I hear you often speaking, Celine. We have a very young membership and that's not going to change. So really we're at a critical point in time where we are changing the narrative of what the pension is actually worth and what it means to people. 

Celine: So from a science perspective, I guess, Thomas, to you, what should we be doing? Like, if too much information is too much information, how do we get people to focus on the right things? 

Thomas: Now what Martin was pointing at is serving, talking to, having a direction from members and just asking them, what do you want? What is the information you would like to have? And quite often it's very simple: "Do I have enough?" So it's a simple question. It's not an easy-to-answer question, case by case, but quite often these are the answers that members want a simple answer to, am I on the right track? 

Thomas: And once we have an idea, this is what members would like to know. Then we can think about how can we use the wealth of data we have? How can we make it easier to answer exactly this question, but it starts from the members. So it's not that we have to come up with what information they would like to have. It's them. So asking them, what is it that you would like to know? 

Celine: Yeah. And what if they don't know the answer to that? What questions should members be asking about their pension? 

Martin: Well, to be honest, most members don't know what to ask. 

Martin: So I think for our members, the first thing to ask is just what do I need to know? And a lot of our members, what they do is they generally tend to choose to interact with OMERS at particular points in their life, you know, enrollment. They recently get married or someone in their family passes away. They think, oh, maybe I need to start looking at estate planning. 

Martin: So there is an opportunity for us to engage members at points where they would need specific information. 

Martin: So really, I think for our members, just start asking about the pension and don't make assumptions. We're also myth busters on the road. 

Celine: I love that. We're myth busters. 

8:13 Why We Put Off Retirement Planning 

Celine: Thomas, are people programmed to think too short-term? 

Thomas: What we do know that people are short-sighted. So whether that's by nature where this is coming from, but I mean, sometimes I try to picture pensions as the most difficult product or service to sell or to explain because you think what normal goods and services that what we like, what most of us like is buy now and pay later. So we want instant gratification. Pensions are exactly the other way around. 

Celine: There's a lot of anxiety around finances. It's hard to know what that next step is. What are some of the factors that lead to people kind of delaying making some of those important financial decisions? 

Thomas: Now, one thing which I already mentioned is inherently complex and complicated. So it's making a financial plan for decades. That's difficult. 

Thomas: But the other thing is, we live here and now. So it doesn't mean we are necessarily short-sighted, but we can put money away, but the next day the car breaks or the children need education. There's so many things that we have to do something about in the here and now that makes it very, very difficult to stay patient and disciplined to work towards the future. 

Thomas: But also many other things like when it comes to investing for yourself, people like to think I'm able to pick the right stock, which typically it's just not true, and so on. So it's like it's more than a handful. It's a couple of handfuls of things that are just complexity, difficulty, but also behavioural biases. It makes it very, very difficult to manage your retirement finances yourself. 

Celine: Anything you'd like to add to that, Martin? 

Martin: Yeah, no, I'd say a lot of the points that Thomas just made really hit the mark in our conversations with our members. 

Martin: The OMERS benefit is often undervalued because it's difficult to really conceptualize today what my benefit will be worth several years down the line. 

Martin: It's not like a lot of our younger members, they know, they compare with their friends. I have $30,000 in my TFSA. Okay, that's great. But do you know that a pension worth $40,000 a year for the rest of your life when you turn 65 is probably worth about a million bucks today, and they don't, they're not able to see that. 

Martin: So the OMERS benefit, we're going to allow you to retire with dignity. You're going to pay for it. You're going to work for it. But a lot of people are not able to see the true benefit there. 

Celine: Yeah, so many people have said to me when they're about to retire, you know, they're so grateful for it. And when I started, I fought not to be part of the plan because I didn't see the value in it. And so I think that happens with life, right? It goes by quickly. 

11:04 The Lifetime Advantage of a Pension 

Celine: Martin, can you talk a little bit about our focus at OMERS for younger members just starting out? I know you're working on what we're calling the Lifetime Advantage program. Tell us a little bit about that. 

Martin: Yeah, no. So we're definitely focused on bringing awareness to our younger members for a few reasons. 

Martin: We don't want people to find out when it's too late. We want them to see value in their benefit, and we want them to grow with OMERS. You know, I like to say we're not just a pension company. We're a retirement company. 

Martin: So when we tackle, you know, educating our younger members, we know sometimes it's probably going to have to be a different angle to it. It's not just going to be okay. This is the pension formula. You usually lose a lot of people when we get to the math. 

Martin: We have a full campaign and we want people to understand the value of their benefit, not just as a retirement benefit, but as probably your biggest financial asset that you may have in your entire life and you may not even know it. So it's kind of like the hidden advantage that you don't even know you're working towards. But we want to make it unhidden. 

Martin: So through a variety of interactions, tools, education over the next, say one, two years, we plan on rolling them out for our members that will truly help with engagement for our younger members. I'm very confident in that. 

Celine: I'm excited. I'm excited to see it. Thomas, anything that still surprises you when you look at sort of the research and data around financial planning and retirement planning? 

Thomas: When you talk to people in the industry that can be in pensions, banking, insurance, take out the comms people, take out the engagement people. If you talk to the remainders, they still believe if we give more information, if we provide more education, if you provide more content, then the problem of retirement planning will solve itself. It's not going to happen. 

Thomas: That surprises me still that while we have the evidence, we just need to go on the street to talk to a random person we pick and we will see that is difficult. 

Celine: Can I ask, do you see any generational differences? 

Thomas: Maybe it's the way of getting your information that's different. Of course, it's now more social media. It's more TikTok. It's more based on the influencers, but whether fundamentally something is different, people are more optimistic, pessimistic, they are more believing into investing themselves or not. I don't think that there are major differences if you compare the cohorts, but I'm happy to be convinced otherwise. 

Celine: I actually like to hear that. I think your point of it might come out of different channels and different preferences, but fundamentally what you're saying is information overload, break it down, keep it simple, tell people what they need to know and as much as possible. 

14:05 Three Questions to Ask About Your Pension 

Celine: So, Martin, I want to ask you what are, so if I am an OMERS member, what are the top three things I should be thinking about around my pension? 

Martin: Okay. I think the first thing is what is my pension? You know, a lot of people don't ask that question soon enough. 

Martin: I think another thing should be how can I maximize this opportunity with OMERS? A lot of people don't even understand that it's actually a relatively exclusive benefit now. DB plans are becoming less and less common. So it's actually a tremendous benefit to actually be able to participate in one like OMERS. And I'm not just saying that because I work for OMERS. It truly is a big benefit. 

Martin: And then I guess the third one is what's important to me because that changes with everyone. Some people are looking for early retirement. Some people are looking to get the biggest benefit. Some people are early in their careers. They don't know if they're going to be with the OMERS plan forever. So I think there's that personalization of it. What is it? And I mean, I might as well maximize as much as I can. 

15:13 AI and Practical Steps for Retirement 

Celine: Okay, my last question before I ask you for some advice for our listeners is around AI. Is AI changing the way that we plan and think about retirement and is it changing it for the better or for the worse? 

Thomas: When it comes, for example, to member communication, I see a lot of potential. I mean, I did the experiment to explain the recent pension reform we have in the Netherlands, which is really complicated stuff. Explain it like for a three-year-old or a five-year-old or a ten-year-old. What I got two years ago, I mean two years ago from ChatGPT. So we are now much further, much better. It was fantastic. I never saw a better explanation of the pension reform we have right now. So maybe for member communication, it's a fantastic thing. 

Celine: Okay, what's one piece of advice or one takeaway that you would like our listeners to take with them with respect to doing something towards their retirement planning? 

Martin: Your OMERS pension will be one of your greatest financial assets. It's important for you to understand it and understand how it's going to help you achieve a lot of your goals and your dreams. And we at OMERS, we're here to help you along the way. 

Celine: That's great. Thank you, Martin. Thomas. 

Thomas: Yes, there are complicated things in life and we delegate them. So if you're ill, we go to the doctors so they're educated to help us when we're ill. So we're not supposed to learn medical stuff. 

Thomas: It's the same with finance. Finance is complicated. We should delegate that. So if there are pension plans and pension schemes that are run by a professionalist, that's not a bad thing. It's actually a very good thing. 

Celine: That's great. Thank you both for taking the time today. 

Martin: Thank you. 

Thomas: Thank you.