The move to defined contribution (DC) pension funds shifted the risk from investment firmly in the direction of the employee. The paternalistic defined benefit (DB) regime promised to give employees a pension based on final salary and length of service. It was a tool to entrench employee loyalty. However, in years of high inflation and poor market performance it was a promise that was hard for employers to keep without incurring large actuarial liabilities.

So almost all private sector funds moved from DB to DC in the 1990s. It took the employer off the hook for its employees’ retirement obligations...

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