Abstract

‘Savings’ yield total returns comprising of 1. contributions 2. returns to them. The first law of investment merely says the more contribution there is the more the total returns but a second one also emerges: tradeoff between the two – risk of loss of principal opening doors for higher returns. Alternatively, certainty of contribution yields lower returns. This has become elf-fulfilling lately given our life cycle. The old is opting for certainty of (1) but the recent Auction Rate Securities (ARS) crisis tell us, even here, certainty is not assured despite the high rations. That leaves the ‘young’ with a double whammy of (2) in addition to exposure to (1). Tag on imposed culture of risk-taking that is blurring the two, -increasing overall risk of loss of contributions thereby narrowing the options toward (2) – and some messy administrative patchwork and one is faced with major hurdles ahead . Historical and cultural contexts, in OECD countries, are traced, pointing to liberal’s double talk, our addiction to spending rather than savings, and government complicity in pension plan busts. A set of coefficients, drawn from social, economic, and political conditioning are used to figure out how they have interacted to break the post-War social spirit that propped up commitments to Defined Benefit plans. Using Canada as a reference point, the emerging culture of deadbeat corporations, among others, has become a emblematic of a frightening trend in high-risk game with a promise of (2) which more often than is illusive.