Jun 21, 2008

DB plans outperforme DC plans by 1%

Watson Wyatt has been comparing rates of return between defined benefit
(DB) and defined contribution (DC) plans for more than 10 years.1
This most recent comparison finds that between 1995 and 2006, DB plans
outperformed DC plans by an average of 1 percent per year.



Asset-Weighted Median Rates of Returns
DB and 401(k) Plans — 1995-2006

Year Number of sponsors DB plan 401(k) plan Difference
2006 914 12.90% 11.34% 1.56%
2005 2, 584 7.74% 6.69% 1.05%
2004 2,583 11.81% 9.80% 2.01%
2003 2,514 21.35% 19.68% 1.67%
2002 2,085 -8.56% -10.93% 2.37%
2001 2,239 -3.78% -6.07% 2.29%
2000 2,058 -0.01% -2.76% 2.75%
1999 1,472 13.46% 14.41% -0.95%
1998 2,958 14.25% 15.29% -1.04%
1997 2,931 18.82% 19.73% -0.91%
1996 3,034 14.53% 14.10% 0.43%
1995 3,063 21.10% 19.20% 1.90%
Average
10.30% 9.21% 1.09%

Source

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