What’s the difference between DB and DC pension plans?

Audio: Malcolm Hamilton on the differences between defined-benefit and defined-contribution pension plans.

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Below is the next installment of my audio interview with Mercer principal Malcolm Hamilton, based on a long session conducted this summer. As noted in the earlier clip about PRPPs,  traditional defined-benefit pension plans are increasingly being replaced with defined-contribution plans for new hires. One of the highest profile examples of this is at the Royal Bank of Canada.

DC plans famously put more investment risk on the shoulders of employees rather than their employers. If markets cooperate this may be a good thing for investors inclined to do their homework and closely monitor the financial world but it does make it more challenging for the average worker who simply wishes to have an assured flow of retirement income in retirement.

Q: What are some other differences between DB and DC pension plans?

A: Press play to hear Hamilton’s response:

 

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