The majority of new pension design ideas use elements from the development of defined contribution (DC) plans, but defined benefit (DB) plan features still have a role to play in “future proof” pension design, according to PensionsEurope.
The argument was the premise of one of two reports that the European pensions trade association launched last week.
“PensionsEurope is a thought leader in Europe and we have designed these two reports to stimulate discussion and debate around defined benefit and defined contribution pensions,” said Janwillem Bouma, chair of PensionsEurope.
“Good outcomes need to be at the heart the industry and we are confident that the thinking outlined in these publications will help the industry to develop going forward.”
The DB-focused report – “Towards a New Design for Workplace Pensions” – discussed the use of DB pension design to strengthen workplace solutions in Europe in the midst of a shift towards DC schemes.
“Looking into the strengths and weaknesses of, threats to, and opportunities for DB pension provision, one could conclude that future-proof workplace pensions should not entirely move away from a pure DB system to a pure DC system,” said PensionsEurope. “Rather it makes sense to maintain the strong elements of DB and to combine them with strong elements in the DC world to find a balance between the two extremes.”
Introducing the report, Bouma described it as a manual for a new design for DB workplace pensions, aimed at member states and stakeholders “reflecting on or introducing or reforming already existing workplace pension systems”.
The other PensionsEurope report – “Principles for Securing Good Outcomes for Members of Defined Contribution Plans Throughout Europe” – covered elements such as plan design, communications, administration, investments, costs and charges, and decumulation.
“In light of the increasing reliance on workplace DC pension plans throughout Europe, it is essential that individuals have confidence that workplace pension plans operate in their interests, are robust, well-run and offer value for money,” said PensionsEurope.
The reports can be found here.
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