Moreover, severe financial turmoil is typically associated with weak labour markets and older job seekers who have trouble finding work may end up retiring earlier than expected (rather than delaying retirement), with lower pension incomes.
The importance of extreme (financial and counterparty) risks in long-term financial contracts is demonstrated by the fact that in a number of countries guarantee arrangements are in place to protect benefits against the insolvency of the DB plan sponsor; for a worker, moving from a DB plan to a DC plan implies abandoning dual protection (the sponsor’s capital and the guarantee arrangement) in favour of no protection at all.