IDEAS home Printed from
   My bibliography  Save this paper

(UBS Pensions series 12) Pension Fund Governance and the Choice Between Defined Benefit and Defined Contribution Plans



Recent events in several countries have underscored the importance of good governance in private occupational pension plans. The present paper uses contract theory to analyze the interplay of residual claims and control rights in private pensions. The residual claimant is the plan sponsor in a defined benefit (DB) plan and the pool of beneficiaries in a defined contribution (DC) plan. The main control rights we examine relate to decisions on funding, asset allocation, and asset management. Under complete contracting, governance can be shown to be neutral: DC and DB plans only on risk allocation. If instead contracts are incomplete, a DB (DC) plan should: (1) Assign more vigilance responsibility to the sponsor (beneficiaries); (2) Rely less (more) on trustees; (3) Tend to employ trustees that are professional experts (caring insiders); (4) Assign asset allocation rights tothe sponsor (beneficiaries); (5) have strict funding requirements.

Suggested Citation

  • Andrea Prat, 2003. "(UBS Pensions series 12) Pension Fund Governance and the Choice Between Defined Benefit and Defined Contribution Plans," FMG Discussion Papers dp454, Financial Markets Group.
  • Handle: RePEc:fmg:fmgdps:dp454

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
    2. Andrew A. Samwick & Jonathan Skinner, 1998. "How Will Defined Contribution Pension Plans Affect Retirement Income?," NBER Working Papers 6645, National Bureau of Economic Research, Inc.
    3. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
    4. Venkiteswaran N, 1997. "Ethics, Values and Corporate Governance," IIMA Working Papers WP1997-08-01_01459, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. Blake, David, 1998. "Pension schemes as options on pension fund assets: implications for pension fund management," Insurance: Mathematics and Economics, Elsevier, vol. 23(3), pages 263-286, December.
    6. Lakonishok, Joseph & Shleifer, Andrei & Vishny, Robert W., 1992. "The Structure and Performance of the Money Management Industry," Scholarly Articles 10498059, Harvard University Department of Economics.
    7. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
    8. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    9. Mitchell A. Petersen, 1992. "Pension Reversions and Worker-Stockholder Wealth Transfers," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1033-1056.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Anne Lavigne, 2006. "Gouvernance et investissement des fonds de pension privés aux Etats-Unis," Working Papers halshs-00081401, HAL.
    2. Jackowicz, Krzysztof & Kowalewski, Oskar, 2012. "Crisis, internal governance mechanisms and pension fund performance: Evidence from Poland," Emerging Markets Review, Elsevier, vol. 13(4), pages 493-515.
    3. repec:aia:aiaswp:wp99 is not listed on IDEAS

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fmg:fmgdps:dp454. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The FMG Administration). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.