<P> For example, the number of defined contribution plans in the US has been steadily increasing, as more and more employers see pension contributions as a large expense avoidable by disbanding the defined benefit plan and instead offering a defined contribution plan . </P> <P> Money contributed can either be from employee salary deferral or from employer contributions . The portability of defined contribution plans is legally no different from the portability of defined benefit plans . However, because of the cost of administration and ease of determining the plan sponsor's liability for defined contribution plans (no actuary is needed to calculate the lump sum equivalent unlike for defined benefit plans), in practice, defined contribution plans have become generally portable . </P> <P> In a defined contribution plan, investment risk and investment rewards are assumed by each individual / employee / retiree and not by the sponsor / employer . This risk could be substantial . Based on simulations from security returns over the twentieth century across 16 countries, there is considerable variation in retirement plan fund ratios across both time and country . Those countries keenest on individual DC accounts have the highest retirement plan fund ratios but all investors in all countries face considerable downside risk . </P> <P> Some countries such as France, Italy and Spain face a ten percent probability of having a real replacement ratio of 0.25, 0.20 and 0.17 respectively . In addition, DC scheme participants do not necessarily purchase annuities with their savings upon retirement and bear the risk of outliving their assets . </P>

Who bears investment risk in defined contribution plan