Perspectives: Designing a Defined-Contribution Plan - What to Learn from Aircraft Designers

Posted: 31 Jan 2009

See all articles by David P. Blake

David P. Blake

City University London - Cass Business School

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: January, 30 2009

Abstract

This article uses the framework of designing a commercial aircraft to illustrate how a personal defined-contribution (DC) pension plan should be designed if it is to achieve its objective of delivering an adequate and secure retirement pension. The article's suggestions are based on similarities between a DC pension plan and an aircraft journey. For example, the strategic investment strategy is analogous to the aircraft, the plan provider is analogous to the aircraft operator, the contributions are analogous to the fuel, and the accumulation and decumulation stages are analogous to the climb and descent stages of the flight. The significant differences that exist between the two concepts are also highly instructive.

Keywords: Portfolio Management: Asset/Liability Management; Advocacy, Regulatory, and Legislative Issues: Advocacy Issues

Suggested Citation

Blake, David P. and Cairns, Andrew J. G. and Dowd, Kevin, Perspectives: Designing a Defined-Contribution Plan - What to Learn from Aircraft Designers (January, 30 2009). Financial Analysts Journal, Vol. 65, No. 1, 2009. Available at SSRN: https://ssrn.com/abstract=1335448

David P. Blake (Contact Author)

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics ( email )

Edinburgh, Scotland EH14 4AS
United Kingdom

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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