Global Pensions, August 15, 2008

Saving in a defined benefit (DB) pension plan can deliver the same level of retirement income at almost half the cost of a defined contribution (DC) scheme, latest research reveals.

A report by the National Institute on Retirement Security (NIRS) found the overall cost to employers and their workers was 46% lower for DB pension plans than a DC retirement plan.

NIRS executive director Beth Almeida said DB plans were ageless and could therefore perpetually maintain an optimally balanced investment portfolio rather than the typical investment strategy of down-shifting over time to a lower risk/return allocation, saving an additional 5%.

Almeida said: “Our analysis clearly indicates the qualities inherent in DB plans, particularly the pooling of risk and assets which fuel their fiscal efficiency.  “The report provides a new lens for policy makers, employers and employees who are all struggling to ensure adequate retirement income with the fewest dollars possible.”  Read the full article here.