Risk and private pension provision

This chapter focuses on the risks relating to private pension provision. It discusses the importance of private pension provision for national pension systems, and the general shift away from defined benefit (DB) provision to greater use of defined contribution (DC) arrangements. The key risks inherent in pension provision are identified and discussed. Thereafter, the distribution of those risks between different types of DB and DC pension provision is examined. In particular, the increasing prevalence of DC provision is considered in terms of the burden of risk this places upon individual pension savers. Thereafter, consideration is given to the extent to which regulation and, in particular, risk-based supervision, can help ensure these risks are adequately managed in DC arrangements to deliver good outcomes for savers. It is suggested that as the risk landscape becomes increasingly complex and difficult to manage, the role of the state and regulators in ensuring the private pension provision secures suitable outcomes in the context of national pension systems is only likely to increase.