What helps good decision making?
We all make decisions every day and regardless of whether they are big or little decisions, the process is the same.
When helping a member make an informed decision about his or her benefits that will have an impact on the rest of their life, it is helpful to under the 5 stages involved in the decision making process.
IDENTIFY THE GOAL
The goal is the decision that is going to be made, for example the member may want to:
This stage also involves identifying and setting out the decision alternatives.
For example, if a member wants to retire early, do the decision options only include how he or she wants to take the benefits, or is another option not to retire at the anticipated date at all?
GATHER INFORMATION
To make an informed decision the member needs to gather all the information from you and others, who can help guide the decision. The member often needs help in understanding the information.
The more significant the decision the more rigorous the information-gathering process should be.
For example, from April 2015 members of defined contribution schemes who retire can decide whether or not to purchase an annuity. If the member does purchase an annuity, currently it cannot be reversed. Providing information on the different types of annuities available in a manner that he or she understands is essential. The decision whether or not to actually purchase an annuity in the first place is critical – the long term impact involves tax consequences and an understanding of where future income will come from for potentially the next 20, 30, 40 years.
CONSIDER THE CONSEQUENCES
What are the likely consequences of the decision?
This is also part of helping a member make an informed decision so he or she understands how the decision will affect not only his or her lifestyle, but also that of his or her family both immediately and in the future.
Using an example of a member deciding whether or not to retire, aside from financial implications the member needs to analyse the reasons why the actual idea of retirement has arisen – is it because he or she doesn’t like their current job or their boss, what are they going to do with all the extra time etc.
The member must feel comfortable with the outcome.
MAKE THE DECISION
After all the information has been considered according to its relevance and significance, a decision can be made and implemented.
EVALUATE THE DECISION
This final step is to determine whether the decision was appropriate.
Some decisions, once made, cannot be reversed; we have already mentioned for example that an annuity, once purchased, currently cannot be changed.
However, there are some decisions where circumstances change and the member requires more help and guidance. These could include changing retirement age, changing investment strategies, joining a scheme that the member previously opted out of etc.
