Pension funds thinking to switch from defined benefit (DB) to defined contribution (DC) could get the best of both worlds by managing for income risk rather than investment risk, according to Jan Snippe, pensions adviser at Dimensional Retirement Europe.
Speaking at a conference held by employers' organisation AWVN, Snippe said DC investment management could take into account possible future sources of income, including possible DB rights and "human capital". He said these additional sources of income would help increase the margin for investment risk in DC plans, although he stressed that investment decisions should not be left to participants.
He also recommended giving participants more say on their mandatory minimum pensions by giving them more options on increased saving, later retirement or increased investment risk.
Leon Mooijman, head of AWVN's advisory team on pensions, underlined the importance of developing a "solid vision" on the issue before taking any decisions on new pensions arrangements. Marco Robben, partner at Mastermind, agreed, adding: "Firstly, know what you want and subsequently make sure providers can deliver what they promise".
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