In recent decades, there has been a clear shift from defined benefit (DB) towards defined contribution (DC) pension provision. In DC schemes, financial risks are borne by the individual participants rather than being shared collectively by employers and employees. DC schemes also often place greater responsibility upon plan members with regard to investment decisions.   

DC schemes may provide a good alternative to DB plans in securing future retirement income. But, experience has shown that proper plan design is critical to avoiding inferior pension outcomes. Contribution rates may be insufficient to achieve adequate retirement benefits. In addition, investment fees – crucial for final pension income – may be considerable in comparison with traditional DB plans.       

Experts agree that the design of DC schemes should aim to achieve:

• adequate contribution rates
• low administrative and investment costs
• high coverage of employees
• a sound default investment portfolio
• a life-cycle approach to investing
• a regular income stream during retirement 

EFRP is convinced that well thought-out DC plans will yield better pension outcomes for Europe's citizens. It provides its members with an excellent platform to exchange best practices and stimulates discussion to enhance pension plan design.