The Parallel Evolution of DC Plans in the UK and US
Two mature defined contribution (DC) markets — the UK and US — appear to have mirrored each other in many aspects of their DC evolution, employing similar tactics, but on slightly staggered timelines.
Here, we explore lessons learned from each market, particularly where each program has flourished, and where progress has stalled.
Public policy is often a major catalyst for DC plan design. By setting plan standards and limitations, legislative changes help buoy public opinion and spur plan innovation. Policy as a change agent becomes increasingly important as governments seek to manage the impact of a large retiree population on national finances, while establishing opportunities for workers to actively plan for their financial future.
While policy initiatives across the globe vary by national, cultural and financial influences, there are increasingly parallels as most markets are converging towards a DC model. Less mature DC markets appear like an abstract or impressionist rendition of the same subject; more mature DC markets can reflect shared learnings, looking like mirror image advances.
The UK and US offer perfect examples of this phenomenon, employing similar tactics but along slightly staggered timelines. Here, we will explore where each program has flourished as a result of policy initiatives, and where progress has stalled.