05 November 2015

PensionsEurope launches a Paper on Pension Design Principles applied to modern Defined Contribution solutions

The paper pinpoints three elements that are essential for the design of modern DC schemes, which consist in taking into account the employer’s and employee’s perspective on retirement benefits, following the pension design principles and applying these principles in a 'straw man' model.

1. The employer’s and employee’s perspective on retirement benefits

The paper looks into the developments that have had an impact on occupational retirement provision in the recent years, including those related to the objectives of employers and employees.

2. The Pension Design Principles which are based on:

- Behaviour

Employees need to have enough freedom to choose tailored pension solutions. The behavioural principles help achieve the balance between offering choice and ensuring that employees are protected against undesirable outcomes.

- Adequacy

While absolute certainty is unobtainable in any form of retirement provision, a relatively stable level of retirement income is achievable with the right tools.

- Risk-Sharing

A DC scheme can offer risk sharing between members based on the risk-reducing benefits of diversification, economic efficiency and fairness.

3. A straw man model

The paper presents a model for the application of the pension design principles.

At the launch of the paper, PensionsEurope Chair, Joanne Segars, said: “PensionsEurope aims to be the thought leader in Europe and beyond on both Defined Benefit and Defined Contribution issues. Today we are pleased to present this paper as a contribution to the evolution of DC schemes. Through our Member Associations and our Corporate and Supporter members we have access to resource and expertise that we will use to further the debate on DC schemes and help to ensure better outcomes for members. I would like to thank all the members of the DC Committee for their contribution to this paper”.

Full paper

Full press release

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