The Pension Builder, Empowering Individuals in Their Retirement Investment Preferences

As the Dutch welfare state comes under increasing pressure, the government has changed the pension system to make individuals take more responsibility for their retirement. This can be risky for both individuals and society, since most citizens lack knowledge of retirement investment. Professors Benedict Dellaert and Bas Donkers from the Erasmus School of Economics (ESE) and both members of the ERIM Marketing programme developed a research-based online tool to help individuals make easier and better pension decisions.

“Our research with Erasmus University has led to a huge improvement in the way in which we measure individuals’ pension risk preferences. It has resulted in a new, interactive tool (the ‘Beleggingsbalans’) that is simpler to use, measures pension risk preferences more accurately, and most importantly, also helps pension plan participants develop a better understanding of the inherent risk-return trade-offs in pension investments.”
– Mr. Koen Vaassen, Manager Marketing and Innovation - Retirement Products, Centraal Beheer Achmea


In recent years, the Netherlands’ fixed retirement income system has come under pressure. It is shifting from a system in which pension incomes were largely stable and guaranteed by employers (Defined Benefit system) to one in which individuals themselves bear the investment risks and may have a lower or higher retirement income depending on financial market performance (Defined Contribution system). In conjunction with this system change, individuals are now increasingly asked to make their own retirement decisions based on their personal riskreturn trade-offs for retirement investments. These developments place a heavy burden on the individual retirement plan participant. Where in the past investment decisions were largely made by professional fund managers, now more and more individuals are required to become active retirement consumers and make their own retirement investment decisions. This requirement poses a significant challenge for pension plan participants and also for society in general, as the potential welfare consequences of individuals making sub-optimal retirement decisions are tremendous.

In particular, as the system shift evolved, it became increasingly clear that current communications and decision aids in use with almost all Dutch pension funds, financial services firms, and insurance firms were inadequate for the task. It was apparent that what was needed was a new way to more accurately measure pension plan participants’ preferences for different retirement investment risk-return options and present these options more clearly. The ultimate aim should be that individuals obtain a retirement income that is as closely aligned with their risk-return preferences as possible.

From a marketing perspective, this challenge calls for sophisticated research and solutions that integrate insights from behavioural economics (on consumer decision making and responses to risks) and econometrics (on modeling consumers’ choices and financial markets). This is where Benedict Dellaert and Bas Donkers have worked with international researchers Dan Goldstein (Microsoft Research) and Carlos Lourenço (University of South Carolina – formerly Erasmus School of Economics) to develop an interactive online instrument that ensures a more refined and accurate communication between individual participants and investment product providers, such as pension funds and insurance firms.4 This interactive tool empowers individuals to choose their own risk-return profile based on their personal preferences, while also taking directly into account the financial products that are available in the market and the projected risks and returns of these products.

In order to test and improve upon their interactive tool and to address the specific challenges posed by the retirement context, Dellaert and Donkers have worked closely with industry partners organised in Netspar, the Network of Studies on Pension, Aging and Retirement.5 This resulted in the “Pension Builder” tool, an interactive graphic interface that allows individual pension plan participants to directly select their most preferred risk-return distribution for retirement income, based on an underlying model of projected retirement investment product returns.
Already, one of the core impacts of the new pension tool is the fact that the concept was fully embraced by Achmea, one of the largest financial service providers in the Netherlands. Triggered by the current system changes, they recently launched a new comprehensive and flexible retirement product. This product is directly coupled with a Pension Builder-style tool (the “Beleggingsbalans”), which is seen as a major new service advantage by the firm.6 Other pension providers, such as Robeco, are also exploring the option of developing similar types of online tools.

This implementation in practice reinforces the advantages of the Pension Builder, which allows for a more accurate method to gauge one’s pension preferences. The risk-return tradeoff is presented in a clearer fashion and so is made more tangible and concrete for individuals. Thus, each individual can be offered a more customised, better-suited retirement investment plan. This also allows pension plan participants to make a better choice by selecting an appropriate risk balance when simultaneously presented with the potential returns in terms of their personal retirement income and the corresponding risks.

More generally, Pension Builder-inspired online tools provide a promising solution for the challenge of empowering consumers in the new Dutch pension system. Such tools are directly in line with the desire for individuals to be more actively involved in their pension decisions. The tools present participants with more accessible information, more and deeper insights in the risk-return trade-offs they face, and can assist in reducing the risk of significant welfare losses in an ongoing pension system transformation that places greater and greater responsibility onto the individual consumer.




4 Donkers, B., C. Lourcenço, B.G.C. Dellaert, and D. Goldstein, 2015, “Individual Investment Advice that Corrects for Probability Weighting,” under second review at Journal of Marketing Research.
5 Dellaert, B., B. Donkers, M. Turlings, T. Steenkamp and E. Vermeulen, 2016, “Towards a New Approach for Measuring Risk Profiles of Pension Plan Participants,” (in Dutch), Netspar Design Paper, 49, Tilburg: Netspar.
6 See