Falling short
Workers are sleepwalking towards an impoverished old age
MORE and more people are speculating on their retirement income, even though they may not know it. According to Watson Wyatt, an actuarial consultancy, the amount of money that is saved in defined-contribution (or money-purchase) schemes worldwide will overtake the amount of money in defined-benefit (or final-salary) schemes by 2014—see chart 1.
For a lot of people, this is going to be a problem. In a defined-contribution (DC) scheme, the eventual pension depends on the investment performance of the fund that the employee has paid into—and he takes the risk of poor investment performance. By contrast, defined-benefit (DB) schemes promise employees a retirement income based on their pay and length of service. The employer takes the risk.
This article appeared in the Briefing section of the print edition under the headline “Falling short”
From the June 14th 2008 edition
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