The most common retirement plans for employers around the world are defined contribution and hybrid pension plans, largely because of risks such as market volatility, increasing costs and stricter accounting guidelines, according to a Mercer report on companies in 47 countries. The trend is particularly marked in newer pension markets such as Australia, where 90% of all pension fund sponsors offered DC plans. Similarly, Brazil, China, Russia, New Zealand and South Africa also are dominated by DC. In the U.S., 60% of the pension fund sponsors offered DC plans, 30% offered DB and 10%, hybrid plans. In the U.K., 64% of respondents had hybrid plans and 18% each offered DB plans and DC plans.
While DC and hybrid approaches have understandable appeal, their popularity may come at a cost, Giles Archibald, international consultant, said in a news release about the report. We anticipate some reassessment of their use as companies make more of an effort to truly understand the impact of these retirement plan designs on employee savings and retirement patterns.
DB plans still dominated in some countries, most notably Japan and the Netherlands, where 82% and 95% of the respondents, respectively, provided them.