In the context of Indian pension reform, sometimes discussions about pension programs run by the employer come up. I have generally advocated not going down that route, because on the sweep of 70 years (from starting to work at age 21 to death at age 91), the firm is but an ephemeral and temporary coalition of a few people and some capital. Firms come and firms go; what makes sense is a portable individual account that stays with the person across job changes.
Today I saw a fascinating article titled The Risk Pool by Malcolm Gladwell, in The New Yorker magazine. This sheds light on three interesting issues. The first is the problems of an employer-centric DB pension program. The second is the debate about India's "demographic dividend". The third is the woes of large US manufacturing companies such as Ford or GM. These difficulties are sometimes attributed to the innately poor competitiveness of trying to do manufacturing at US wages. But as the author argues, is (to a large extent) merely caused by a bad (DB, firm level) pension program.
The article suggests that one way to solve the problems of GM or Ford would be to take them into bankruptcy, thus getting away from existing pension promises, and then selling off the good parts to a private equity firm which would be able to rebuild these firms as sound businesses; that once the flawed pension plan is out of the way, GM or Ford are actually viable firms. Perhaps Tata Motors should wait in the wings, for the time when GM or Ford go belly up.
I am sometimes accused of being obsessed about financial planning for old age, but I do think that small mistakes on pension policy have far-reaching consequences, and thinking this through requires complex reasoning that spans across many fields. Gladwell's article nicely highlights how an apparently small mistake made by CEOs of these firms, a few decades ago, was big enough to destroy these firms. The same applies for countries, in more ways than is widely understood.