Delayed gratification, or deferred gratification, is the ability to resist the temptation for an immediate reward and wait for a later reward. Generally, delayed gratification is associated with resisting a smaller but more immediate reward in order to receive a larger or more enduring reward later. A growing body of literature has linked the ability to delay gratification to a host of other positive outcomes, including academic success, physical health.
Arguably one of the most famous psychological test is the Stanford marchmallow test. For those of who are not familiar with the experiment a group of kids were tested by being placed in a boring room with just a table and chair with 1 march mellow in front of them. They were told that if they could resist temptation for 15 mins that they will be given two. A person’s ability to delay gratification relates to other similar skills such as patience, impulse control, and willpower, all of which are involved in self-regulation. Follow on studies on these children observed that the ones which were able to resist temptation did better in all aspects of life.
So what does this mean for the future state of pensions in Ireland? To simplify if offered €100 today or told that you can have €105 tomorrow, the majority of people will take the €100 today. Which if taken as on offer of 5% interest in one day is a crazy offer to turn down. However in an unstable environment due to our basic instincts we make poor financial decisions for instant gratification. Perhaps more interestingly if offered the same amounts based on a different time frame the decision is different. If somebody is offered €100 in 30 days time of €105 in 31 days time most people will go for the 31 day offer, how we value that day differs greatly dependent on our sense of security. This finding has obvious implications for people willing to opt in company pension schemes given the imputes the opt for the instant reward i.e higher take home weekly pay is going to cause a huge issue as more people will be reliant on the government pension scheme.
So what is the answer, well just like marketing it is all how we phrase the question. Upon joining a company those who have the default position set to be in the company pension scheme compared to those who have to opt in have a 80% greater uptake overall. Marketers rely on the human instinct need for instant gratification to persuade people to buy now. Using tactics such as special offers, 50% free, and limited supply/edition are all techniques that the marketer uses in order to create the uncertain environment.