EFAMA, the European Fund and Asset Management Association, presented at a conference in Brussels the report "Defined-Contribution Pension Schemes - Risks and Advantages for Occupational Retirement Provision". The report confirms that public authorities should broaden the availability of DC schemes in order to encourage households to save more to ensure an adequate level of retirement income.
The findings of the report lead to two key policy messages:
• DC schemes are in essence long-term savings vehicles. Asset managers can structure DC investment to meet the preferences and needs of individuals and to maximize the risk-return performance of the retirement wealth. Solutions exist to reduce or even eliminate investment risk. However, they can impose a significant cost in terms of forgone returns. Consequently, regulations that ask for such risk mitigation and thus strictly limit investment in certain asset classes, can have a highly negative impact on retirement wealth for the majority of participants in DC plans.
• Sound governance and risk management practices can easily be implemented in DC schemes to ensure the safeguarding and investment of pension assets in the best interests of scheme members. And solutions are available to help individuals in making the right choices when it comes to deciding how to invest their DC pensions, e.g. pre-selection of the range of investment options, specification of a default option, or provision of targeted information and advice.
Given the strengths of DC schemes, and the ease with which they could be offered on a cross-border basis, EFAMA believes that DC schemes are the single most appropriate arrangements around which to build a single market for occupational pension products.
Press release
© EFAMA - European Fund and Asset Management Association
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