The concept is great.  Join an organisation.  Give the best years of your life to the organisation.  Expect that when you receive the retirement watch in your 65th year that you should be able to ‘retire’ – meaning live a confortable life, without being required to work.  You should expect to retire without any financial worries – with a month income of 50 -66% of your salary on retirement. In Ireland, if your are working in the public service, then this should adjust in line with salary increases awarded after your retirment date.

Companies operating such schemes have been ploughing money onto the schemes – and the fund managers have been investing these moneys in shares, bonds, property, cash, whatever.  Unfortunately these funds have nose dived.  In addition the companies with the commitments to make regular payments to the funds (to include payments to make up for the shortfall in the fund performance)  are not making much (if any) money themselves. 

The debate re defined benefit and define contribution seems to focus on twoitems: (1) who should take the risk re the performance of the funds in which the moneys are invested – the employer or the employee? (2) are companies using the move to defined contribution to reduced their total costs of employement?

Today’s Economist, private accounts, poses many of these questions.  The statistics around pension funding shortfalls are pretty intimidating.  For a number of the entities it might be argued they would be better off going to the wall than trying to run themselves into the ground to meet pension funding shortfalls.  Or it might be argued the employees in such companies might be better off walking out – on the basis that they realise the companies will be inable to meet their pension obligations without effectively going to the wall.  Or it might make a lot of sense on both sides to sit down and come to a workable, mutually acceptable, compromise – whereby these pension benefits (and associated commitments) are reduced and agreed.