Pension scheme trustees as surrogate decision makers*

Pension trustees make surrogate decisions on behalf of scheme members. However, prior research has not explored how this might affect pension adequacy. Our results show that when setting targets for pension replacement income, trustees project their own preferences instead of reflecting member preferences. Furthermore, projection was more pronounced for trustees with lower financial literacy. Trustees choose significantly higher pension replacement rates for members than members choose for themselves. Trustees also choose replacement rates higher than current benchmarks. The economic consequences are potentially considerable, due to high levels of pension contributions and incompatible risk-taking. A better understanding of the dynamics of decisions made by trustees is needed to ensure better member outcomes.