Household financial decision making: Qualitative research with couples

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Retirement decision making
4.2.2 
The appeal of tangible outcomes
Behavioural economics argues that the more distant and abstract the outcome of a decision, the 
harder it is to arrive at. An added complication with pensions is their lack of tangibility: there is 
no physical ‘reward’ as a result of the decision, as there is with many purchases. To illustrate this, 
participants in this research whose significant financial decisions had been to purchase cars and 
holidays, for example, had not usually felt intimidated by these decisions. This ties in with Thaler
and Sunstein’s (2008) claim that people find it easier to make decisions that give them constant
or immediate feedback and reward. Buying a car gives instant gratification because it can be driven 
straight away; purchasing a holiday does not give such immediate feedback but the time that 
elapses between making the decision and experiencing the holiday is generally a relatively short one. 
There were indications that decisions couples had taken to purchase financial products had been 
harder. However, many alpha partners and some beta partners still appeared comfortable with 
decisions of this kind – insurance products, for example. Typically, couples who had purchased these 
products had identified a need for them, and so were clear that this was something they wanted, 
and were gratified by the purchase. While, for example, life insurance did not give ongoing feedback 
to couples purchasing it, they were rewarded by the feeling that they had cover in place and would 
benefit from the product if they needed to.
Behavioural economics also holds that people tend to struggle to make decisions when the choices 
they make give them poor feedback and give uncertain returns. In this research, people indicated 
that choosing investment products had put them out of their comfort zone compared with more 
‘everyday’ purchases. The products appeared more distant and abstract to people, with only a few, 
mainly alpha partners, comfortable making these decisions. 
Finally, pensions represented one of the most difficult financial decisions couples were faced with. 
These were seen as the most distant and abstract sort of financial product, and the uncertainty of 
the return they might provide was thought of as one of their defining features. Some people talked 
about struggling to understand pension statements, or simply ignoring them, and many expressed 
concern over ‘horror stories’ they had heard in the press about returns and losses. 
Figure 4.2 illustrates how the ease of making financial decisions varies according to how tangible or 
abstract the product in question is.

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