A response to pressures on pension finance caused by population ageing and economic turbulence has been a substantial move from traditional defined-benefit plans in which, at least in principle, all risk falls on the contributions side, to defined-contribution plans in which risk during accumulation all falls on the benefits side. This paper argues that both designs are ‘corner solutions’ and hence generally suboptimal, and goes on to set out a range of designs that offer different ways of sharing risk among workers, employers, future pensioners and current pensioners.

This paper studies the effects of risk aversion and density of contribution (DoC) on comparisons of proportional charges on flow (contributions) and balance (assets) during the accumulation phase of a defined-contribution pension plan in a system of individual retirement accounts. If the participant's degree of risk aversion increases and both charges yield the same expected terminal wealth, then the charge on balance improves with respect to the charge on flow when performing comparisons that examine the ratio between the resulting expected utilities of terminal wealth. When this methodology is applied to the Peruvian Private Pension System, empirical results demonstrate that the aforementioned result also holds for arbitrary charges on flow and balance and that the effect of DoC on these comparisons is nearly negligible for most of the assessed scenarios.