Pension payment plans and individual preferences

There are two main types of pension payments existing: one is a total lump sum payment, the other is a scheduled and continuous fixed payment. From the pension fund managers' positions, they would like people to choose the second way to receive pensions. as they would like to maintain their fund sizes and larger sizes can generate better incomes for themselves. Individuals will choose the one has a higher expected return; therefore, the fund managers often design a payment structure to encourage people to choose to receive scheduled payments instead of lump sum one time payments.

Some people may not receive full and perfect information of their pension programmes due to varies limitations including knowledge and time limitations. Therefore, different people will have different individual preferences and come out different options. Moreover, people have different expectations and calculations about their futures. They could have different opinions about their pension fund futures. When they have full confidence about these pension funds, they will be less likely to take all cashes out of the funds; otherwise, they will choose to take cashes immediately as they feel their money in the funds is not safe. They could have opinions about the future of the economies, which can affect their fund performance. Some pension schemes currently adapt to the inflation factor, so the inflation factor is less concerned by people. These factors are the factors will affect people's judgement about their pensions' monetary present values.

However, people will choose different options based on their uses of their pensions. Their uses of pensions change the time values, as some people focus on the immediate use of the pensions, so they will have greater discount rates than others. Sometimes, some people may need relatively big money to settle themselves after retirement, in this case, they will definitely choose to receive a lump sum payment without any concerns about the future. These people may face immediate financial difficulties that force them to draw their entire pensions at one time.

Overall, the short term economic performance could have a strong impact on people's pension decisions, as it could affect people's expectations about their pension fund performances as well as their immediate financial situations that could force them to make certain decisions.