The shine is off DC plans, for now

While nervous employees run for cover, defined contribution pensions still a viable option
By Janet Robovsky and Lori Satov
|Canadian HR Reporter|Last Updated: 06/13/2003

What a difference two years make. With slowed economic markets and corporate accounting scandals, the infatuation with defined contribution pension plans (DC) has waned.

Double-digit returns are gone, replaced by negative or minimal growth. Plan members, many of whom don’t remember the pain of a prolonged bear marked, have been unprepared for this outcome and notably upset with the diminished value of their retirement portfolios. Some DC plan members may be longing for the good old days when their pensions were guaranteed under a defined benefit plan (DB). Many older members now believe that they must defer their retirement age by a few years.

While DC plans may currently be out of favour among employees who do not properly understand investment strategies and are not willing to patiently sit out market volatility cycles, they are still a viable and appropriate vehicle for providing retirement incomes.