The financial crisis has impacted both companies with defined benefit (DB) and defined contribution (DC) plans, according to AEGON Global Pensions' latest white paper on international pension provision.

The document, entitled Building pensions for the future, reveals that the global economic crisis has exposed significant weaknesses in both DB and DC plans; and that although companies with DB plans have experienced the most immediate and significant consequences - as risk is shared by both company employees and plan participants - companies with DC plans could be facing a problem that is greater than they realise.

The report states: "A potentially toxic combination of increasing longevity, poor investment strategies, insufficient contribution rates and inadequate communication to members (coupled with unrealistic expectations) may build up to form a DC legacy problem for both employees and their employers."

In addition, companies with international operations are even further exposed, as every country has different rules and regulations, so their pension plans have been affected in different ways.

The White Paper also outlines practical ways in which companies can manage their DB risks effectively (for example by taking advantage of the variety of de-risking mechanisms the market offers); can provide adequate DC (for example, by ensuring members start saving earlier and save enough); and better manage the pensions process (such as making sure proper processes are in place and take advantage, where appropriate, of cross border opportunities).

Martijn Tans, author of the white paper and marketing director at AEGON Global Pensions, said: "Although DB pensions have been making all the headlines, the underlying issues facing DC provision have not received so much attention. If we want to build a strong DC system for the future - one that will provide adequate pensions for most people - then we need to address current DC weaknesses."

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