I always feel like I'm missing something fundamental when I read these debates. unless the only alternative is "no retirement plan", why would you ever want a pension? wouldn't you be much better off having your employer dump the funds in your 401k?
Pensions are complicated by lump sum payouts, survivor benefits for spouses, and a bunch of other things. But you collect them for life. If you live a short time, the 401k might be a better outcome and the beneficiaries of your will can inherit the wealth (or your spouse, if you outlive them, vs reduce survivor benefits). If you live a long time, it's overwhelmingly likely you have not saved up enough for it, and short of letting the elderly eat cat food and die on the street, the costs of that outcome are socialized to the rest of us.
There is still loads of risk to the employer as they are on the hook for any future shortfall. Shortfalls are common as there is huge correlation of risk, such as actuaries systematically under estimating gains in life expectancy. That's why most such schemes are in deficit.
One of the problems that caused the decline of DB pensions is the accounting industry decided on such a unlikely scenario that inflated the cost to the employer immensely.
One pension trustee commented that the scenario came true you'd be more concerned about your stockpile of tined goods and shotgun shells than a pension.
So who pays the accountants and who now has a nice excuse to shut down its scheme :-)
If you as an individual still want proper longevity insurance and the predictability of a defined-benefit-plan without this risk, just use the personal retirement savings to buy an annuity.
Also, how are you just ignoring have to rely on the honesty/fiscal stability of the company backing your hypothetical annuity in the space of two paragraphs?
Pensions are disappearing anyway so I feel like we're arguing the nutritional value of eating yangtze river dolphins, but that is because 401 plans are cheaper for employers and there is a lucrative fee structure in administering them, not because of an intrinsic flaw of pensions.
And PBGC is woefully underfunded. It’s already needing a bailout with just a few failing multi employer funds. It’s mostly for show I presume, since this isn’t even the first time it’s getting bailed out.
https://www.bloomberg.com/news/articles/2019-07-25/house-pas...
This article is about a British company. 401ks do not exist in the UK, and you get a lot of benefits and tax allowances from pensions that you get out of no other investment vehicle over here.
An interesting place to see this is in groups of US military members talking about the pension plan they just had the option to switch. The 401k version has a higher expected value than the pension version, yet many people who are themselves sticking things out to pension age prefer the pension age. Though it may be that people staying in the military trend risk averse.
I'm sure this is more nuanced, and risk aversion may depend on the type of risk (ex. financial risk vs physical risk). But it still sounds really strange to me to characterize individuals who volunteered to join an organization that may (and probably will) put then in very dangerous situations as "risk averse".