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She said VPLAs are just starting to emerge, with Quebec finalizing legislation allowing them. Ontario is looking at the same thing.

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“Basically, they allow for longevity pooling within a DC plan and to convert a portion of savings into a stable income,” she said, adding that the key difference is that the outcome is still not a promised benefit like a defined benefit.

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Nunes, a fellow and director of the Canadian Institute of Actuaries, said the while the predictability of DB plans drives demand, the features matter, with a key issue being whether payments are indexed to inflation.

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“A good time to be in a defined benefit plan was when interest rates were low, and markets were not performing well. Think about the text bust in 2000 or 2001,” said Nunes, noting those people managing their own money lost a massive chunk of their retirement overnight. “Historically, when there is a big correction, things recover. But if you were at a point in time where you wanted to retire, your plans got kiboshed. You have to withstand some ups and downs.”

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In the 1990s, she noted employees “put up their hands” for defined contribution because they didn’t want to be in defined benefits plans where the employer kept the money if the plan was overfunded.

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Typically, defined contribution plans offer less generous employer matches. Nunes said in a government-operated defined benefit plan, the employer might be putting in something equal to eight per cent or nine per cent of pay to match the employee contributions. Defined contributions are more typical at five per cent match, said Nunes.

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“The value of your defined benefit could be worth more than your house,” said Nunes, adding a caveat of those plans is how much can be transferred to a spouse if you die early. “Other people argue I would rather have my (retirement account) where I can see $1 million and leave it to my spouse or children.”

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Kevin Cork, a Calgary-based certified financial planner with Investia Financial Services Inc., said he recommends a defined contribution plan for those under 30 because a defined benefit is conservative in its investing strategy.

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“This is provided they are investing properly,” said Cork, who will sometimes deal with people in their 60s who have done nothing with their DC accounts for decades and end up with little appreciation. “They will have it sitting in a savings account option for 20 years.”

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Even with better employer contributions, Cork said he believes defined contribution can create more money if people are properly invested, but that means having the stomach for the market, which can be a roller coaster at times.

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“Human nature is the stumbling block. If they don’t have someone holding their hand, they will bail the next time the markets go down,” said Cork. A panic sale during the COVID-19 panic looks pretty ugly, with the S&P/TSX composite index almost three times its low from 2020.

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“We haven’t had a multi-year bear market for a long time,” said Cork, noting it’s easier to talk people into investing when markets are up. “I like to tell people about (events like) 1987. But for something like a global financial crisis, they have to know they can survive that test. Historically, stocks make the most money, but you have to handle the volatility.”

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Cork said the shift from corporate responsibility in a DB plan to greater individual responsibility in a defined contribution plan is unlikely to go away. “They’ll give a seminar on how to invest it, but in the end, it’s your choice,” he said.

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Sure, it looks cushy to have a better-funded, likely government-backed, defined-benefit plan. Not everyone will embrace defined contribution, but it’s an opportunity to create your own wealth.

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