On Pension Plans Busts, We Were All in on the Highs: Social and Cultural Contexts for the Shifting Perception of Risk

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‘Savings’, in its pure form, is supposed to yield total returns comprising of

  1. contributions
  2. returns to it.
The first law of investment not only says that the more you save the more total returns you get on it but a second one too points to a tradeoff between the two – risk of loss of principal yields a higher return, or certainty of contribution yields lower return. This became self-fulfilling given our life cycle: the older have preferred certainty of (1) and the younger the dominance of (2). Lately, though, an imposed culture of risk-taking is blurring the two as increased risk of loss of contributions for after-work purposes narrows options toward approaches to investments favoring (2).

Historical and cultural contexts in OECD countries are made, Canada being a reference point for the comparative analysis. A set of matching coefficients (using factor analysis) drawn from social, economic, and political conditioning are used to figure out how they have interacted to break the post-War social spirit that governed commitments to Defined Benefit plans. Easing up on such social controls, undoubtedly, have amplified risks of various kinds – evidenced by the dominance of deadbeat corporations, hedge funds, and institutional investors in the financial markets - leaving the main viable strategy of choice of finance as high-risk with a promise of (b) high returns that, more often than not, is illusive.


Keywords: Defined Benefits, Defined Contribution
Stream: Economics and Management
Presentation Type: Paper Presentation in English
Paper: On Pension Plans Busts, we were all in on the Highs


C. Fiifi Odoom

Assistant Professor, Faculty of Business Administration, Douglas College
New Westminster, B.C., Canada


Ref: I08P0511