The Decline of the Traditional Pension : A Comparative Study of Threats to Retirement Security

Many employers in the industrial countries used to provide retiring employees with a pension payable for life based on years worked and salary. This book studies developments in ten countries to explain why the importance of the traditional pension has diminished and proposes remedies to bolster retirement security.

The traditional (final or average salary) pension that employers have provided their employees has suffered a huge decline in labor force coverage in the United Kingdom and the United States, and less severe declines in Canada and elsewhere. The traditional pension provides a precious measure of retirement security by paying retirees an annuity for life. This study compares developments in the countries just named and in Australia, Denmark, Germany, Japan, Netherlands, Sweden, and Switzerland to explain the forces behind the decline of the traditional pension and to contrast the experience of public sector employer-provided plans, where it remains dominant. Given the great value of the longevity insurance that the traditional plan provides, and the risks its diminished coverage entails, the book proposes a set of measures that either stem the decline or endow defined contribution pensions with some of the attributes of the traditional plan.