Designing And Delivering Effective Workplace Pension Plans: What The Financial Services Industry Could, And Should Be Doing

“A study by the U.S. Government Accountability Office (GAO) showed that most DC pension plans do not offer products and services that could help participants turn their savings into a retirement income stream.”

PLANSPONSOR MAGAZINESEPTEMBER 9, 2016

Three Pension Design Problems

It is a great privilege to tour the world talking about the three messages in my new book THE FUTURE OF PENSION MANAGEMENT: 

1. Pension design matters
2. Pension governance matters
3. Pension investing matters 

A fourth message is that we must get better at integrating these three messages into a holistic view of what an effective retirement income system should aspire to, and what needs to be done for it to achieve its intended purpose. 

A good place to start the ‘pension design matters’ conversation is with the World Bank’s 3-pillar model for national retirement income systems: 

1. Pillar 1: a universal base pension for all citizens funded through the tax system.
2. Pillar 2: a web of workplace-based pension plans pre-funded through dedicated contribution streams and retirement savings pools.
3. Pillar 3: a collection of mechanisms that permit individuals to accumulate retirement savings on their own. 

This structure is useful for asking what is working in retirement income systems around the world, and what is not. The book’s three headline assertions are: