Please Don't Kill All the Pensions

In a lot of ways, traditional pensions are much better than the so-called defined contribution plans -- mostly 401(k)s -- that have largely replaced them in the U.S. private sector. A group pension is less expensive to administer than lots of individual investment accounts. Professional pension managers generally do a better job of investing than individuals with other things on their minds. Forcing people to save via a pension, while it limits freedom of choice, is a better way of ensuring adequate retirement income than simply offering a tax-advantaged or even employer-subsidized opportunity to save. And by spreading longevity risk over thousands of people, pension funds don’t have to set aside as much money per person to guarantee an adequate retirement income as individuals saving for themselves do.