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DC Pension Fund Best-practice Design and Governance

36 Pages Posted: 4 Aug 2010 Last revised: 22 Sep 2010

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment

Roger Urwin

Willis Towers Watson

Date Written: August 3, 2010

Abstract

The design and governance of pension funds is an important topic of academic research and public policy and has significant implications for the welfare of participants. Here we focus upon the design and governance of defined contribution (DC) pension plans which have become the de facto model of occupational pensions in most countries. The study synthesises the findings of a year-long research project based upon in-depth interviews with the sponsors and managers of leading schemes from around the world. We begin with the dual nature of the governance problem characteristic of DC pension plans, emphasising aspects related to the self-governance of individuals in relation to their long-term interests as well as the ambivalence and conflicts of interest in plan sponsors. With those problems in mind, we focus on the design of DC pension plans and then their governance so as to challenge existing institutions in particular jurisdictions. Our findings have implications for employer-sponsored plans, multi-employer plans, and the public utilities that have been established or proposed that may transcend company-based and industry-based pension institutions. Whereas DC plans were once believed to be simple solutions to burdensome defined benefit liabilities, it is shown that there is nothing simple about a well-designed DC pension plan. In essence, the complexities associated with DB liabilities have been exchanged for complexities in the design and management of DC institutions.

Keywords: Defined contribution pensions, design, governance, best practice

JEL Classification: D01, D02, G23, J32

Suggested Citation

Clark, Gordon L. and Urwin, Roger, DC Pension Fund Best-practice Design and Governance (August 3, 2010). Available at SSRN: https://ssrn.com/abstract=1652680 or http://dx.doi.org/10.2139/ssrn.1652680

Gordon Clark (Contact Author)

Oxford University - Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44 1865 285197 (Phone)
+44 1865 285073 (Fax)

HOME PAGE: http://www.geog.ox.ac.uk/staff/glclark.html

Roger Urwin

Willis Towers Watson ( email )

875 Third Avenue
New York, NY 10022
United States

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