GLOBAL - Most of the Global Pensions 100 Panel shunned having risk shared between the employer and employee, with 71.8% of respondents saying pension funds should be entirely DB.
The last few years have seen a flight to defined contribution schemes, shifting risk from the sponsor squarely onto the shoulders of the scheme members. However, the most recent Global Pensions poll revealed that pension funds themselves were unhappy with this development.
Almost three quarters of the panel respondents said pension funds should be entirely DB – that is with the risk lying with the sponsoring employer.
Not a single respondent voted in favour of schemes being entirely defined contribution (DC).
One respondent said: “To ensure a real incentive to join a scheme, employees need to have a clear indication of what they will receive at the end, not what will be put in on their behalf.”
Another fund trustee justified his answer by explaining that DB was far more transparent and that DB scheme design was far more understandable.
Given the option of a com-promise between DB and DC, 28.2% of the pension funds said this would be preferable to having to choose between one and the other.
A variety of hybrid plans have been available for a while, but have yet to catch on globally.
Recently, Global Pensions exclusively revealed the possibility of more inventive plan design taking off in Ireland. Irish pension funds, which never made the complete shift to DB, have shown an interest in plans that offer shared risk.
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