IDEAS home Printed from
   My bibliography  Save this paper

Retirement 20/20: Innovation in Pension Design


  • Robert L. Brown


Today, both the United States and Canada are experiencing a decline in Single-Employer Sponsored Defined Benefit (DB) Pension plans. In some instances, they are being replaced by Defined Contribution (DC) or Individual Account [e.g., 401(k)] plans; in other cases, by nothing. It appears that traditional sponsors of DB plans have concluded that their cost (or its variability) is larger than the rewards (e.g., a loyal work force). At the same time, two stock market meltdowns in less than a decade have indicated to all the frailties of Individual Account DC systems. What we need is a new pension system that brings most of the advantages of the DB and DC plans to the participants, while minimizing their disadvantages. We must also recognize the skill set of the participants (e.g., do not expect a blue collar worker to be an investment professional) and not anticipate or require anomalous markets (e.g., ever-stronger equity returns). Size matters. Larger plans can run at lower per unit expense ratios, and can also achieve entry into a wide variety of investment products (e.g., private placements) not available to a small plan. Larger funds also benefit from risk sharing through “Law of Large Numbers”. The model proposed is a “Jointly Governed Target Benefit Pension plan”. Such plans would have many features in common with today’s Ontario Multi-Employer Pension Plans (MEPPs), the Canada/Quebec Pension Plans (C/QPP), TIAA-CREF in the United States and the Dutch national plan. For the plan sponsor, this is a DC plan. Inherent in the concept are that smaller plans (and even individual plans) could commingle their assets to achieve “size” (e.g. a minimum investment portfolio of $10B). Investment management would be at arm’s length from the plan itself.

Suggested Citation

  • Robert L. Brown, 2010. "Retirement 20/20: Innovation in Pension Design," Social and Economic Dimensions of an Aging Population Research Papers 267, McMaster University.
  • Handle: RePEc:mcm:sedapp:267

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Gary Burtless, 2010. "Lessons of the Financial Crisis for the Design of National Pension Systems," CESifo Economic Studies, CESifo, vol. 56(3), pages 323-349, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Target Benefit; Joint Governance; Commingled Assets;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    NEP fields

    This paper has been announced in the following NEP Reports:


    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:mcm:sedapp:267. 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: (). 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.