Writing for the Globe and Mail, Rob Carrick says that when it comes to defined contribution savings schemes, “it’s hard to say whether employers or employees are the bigger problem.”
“Too many employees are oblivious to their responsibilities to make their defined-contribution pension plans work, and a lot of employers seem to be clueless about the problem. In the ongoing discussion about how well prepared Canadians are for retirement, DC pensions are as much problem as solution,” he writes, calling DC the “second-best sibling of the defined benefit plan.”
With a DB plan, members are paid a lifetime monthly benefit, “pegged to your years of service with your employer and salary,” continues Carrick, adding that “DC pensions are more like savings plans – employers and workers contribute to investments that end up as a pot of money you have to manage as a retiree. How long the money lasts is entirely in your hands. There are no guarantees.”
As such, DC requires more attention, writes Carrick, adding that a “recent presentation by people at the actuarial consulting firm Eckler Ltd. offers a discouraging view of how well DC plans are working. Both employees and employers seem to be operating under false assumptions about what the other is doing to ensure pensions are being managed and used effectively.”
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