DISCUSSION PAPER PI-0210

The Shift from Defined Benefit to Defined Contribution Retirement
Plans and the Provisioning of Retirement Savings

Donald Ross and Lester Wills

ABSTRACT

This paper examines the trend in retirement savings away from the Defined
Benefit (DB) to Defined Contribution (DC) plans. It looks at reasons why this
shift has occurred in several countries, considers the potential offered by
the change and then briefly examines the operation of DC plans in the US
and Australia. Problems with both the voluntary and mandatory approach to
retirement savings using the DC plans are outlined. The potential consequences
of the shift are then reviewed in the context of responsibility for the retirement
savings decision and personal involvement in retirement planning process.
The paper concludes that the level of involvement in the personal retirement
savings decision may be a critical factor in determining the propensity of an
individual to save for their retirement. As a result research is proposed to more
fully consider the involvement of the individual in the personal retirement savings
decision.

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