Irrational or Rational? Time to Rethink Our Understanding of Financially Responsible Behavior

Abstract

Models of finance rationality expect individuals to actively prepare for retirement by consistently investing and building a diversified asset portfolio, with any behavior deviating from these expectations being identified as irresponsible. This framework of (ir)rationality and (ir)responsibility ignores the role of constraints in shaping financial behavior. Extending economic geographic insights on everyday financial practices as complex processes of meaning-making, we reveal how varied approaches to retirement savings are shaped by the experience of constraints inherent in a capitalist welfare state. Using the accounts of forty-two interviewed women and people with a minority ethnic background in the UK, we show how the interplay between everyday rationalities and structural constraints construct variegated financial subjectivities and practices that reflect the context that individuals face. Our findings contribute to the theorization of variegated financial subjects and disrupt the application of corrective policy measures, such as financial education, which put more pressure on individuals rather than tackling the inequalities inherent in the capitalist welfare state broadly and in the pension system specifically.

Key words:

• finance
• rationality
• pension gap
• variegated financial subjectivities

Data Availability Statement

Due to the nature of this research, participants of this study did not agree for their data to be shared publicly, so supporting data is not available.

Notes

1 An employee needs to earn at least £10,000 per year in one place of work to receive an employer’s pension contributions on any earnings above £6,240.

2 Ethical approval was given by the Open University Human Research Ethics Committee (HREC/2016/2317).

3 The classifications of ethnic backgrounds is based on the guidance provided by the government (GOV.UK 2021).

4 Forty-nine percent of UK pension savers are in pension schemes that are considered expensive (Morton 2021).

5 Namono has four children (“two independent and two dependents”) and experiences similar constraints as Amidah, having a partner who refuses to divorce.