The Dysfunctional 'DB vs. DC' Pensions Debate: Why and How to Move Beyond it
4 Pages Posted: 18 Sep 2012
Date Written: September 17, 2012
Traditional DB and DC pension plans have both become dysfunctional, as have attempts to “prove” that one is superior to the other. Far better that we should devote our energies to designing a new breed of pension plans, adapted to twenty-first-century realities. Such plans strike an intelligent balance between the dual goals of adequacy and affordability. They are transparent, value guarantees honestly, and are respectful of the property rights and the differing risk tolerances of plan participants. Finally, while DB defenders often confuse pension design and implementation, high performance twenty-first-century pension institutions can cost-effectively manage any pension design, not just those based on DB formulas.
Keywords: Guarantee Valuation, Pension Plan Design, Pension Adequacy and Affordability, Risk Tolerance, Pension Plan Management
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