It's probably a pretty tenuous connection given a lot of large private sector companies used to have defined benefit pensions too. It was one of a bucket of benefits that was sort of expected. At some level, modulo tax effects, a dollar in benefits is theoretically a dollar not paid in salary but that's not really how things work--certainly not on a 1:1 basis.
If I weren't going to start collecting a pension soon from some ago company that by now has gone through a couple generations of acquisitions would I have been paid more at the time? Maybe I guess. But it's very indirect.
The problem was a few companies went bankrupt and then the workers discovered not only did they lose their job, but it turns out the pension they had been in for decades was invested in company stock and thus worthless.
We have a lot of laws around pensions these days to prevent that. However they were written when the investing environment was different (higher interest rates made AAA bonds a great investment, so investing in risky stocks didn't make sense). The result is pensions are generally have a terrible return on investment. You are much better off with a well managed 401k in modern funds (at least as I write this and the 30 years before, while I can only guess what the future will hold I think that trend will hold for the next 10 years at least).
401k has one other advantage: it is clear where the money is and who controls it. Pensions often are setup as a great deal if you work for the same company for 40+ years (25-65), but if you switch jobs you don't get nearly as much, even if all the other companies have a pension plan your total is much worse.
>401k has one other advantage: it is clear where the money is and who controls it.
I'll add another one: the investor can tailor their risk to where they are in life. At some point, it probably makes sense to put even most of my savings in very low risk, low yield bonds.
But that point is probably not when I'm in my twenties.
I actually understand the appeal of a (presumably) low risk "guaranteed" annuity payout at retirement that may have been a long ago benefit you never really thought about. But it probably wasn't really free and probably doesn't represent a better investment than if you were given the actuarial share of the money paid into the pension on your behalf instead.
A pension should be able to look at demographics and even better manage that risk. You have no idea if you will live to 105 (a few years ago I saw a headline suggesting 175 might be a reasonable life expectancy for young people today - even more unknown though I don't know if it is true), or die at 63. You might have some family history as a guide, but odds are yours is average: sometime between 65 and 95 with a peak around 78. Realistically, for almost everyone our expected lifespan is so close to even that we shouldn't be tailoring our investing to anything out than our age.
A lot risk annuity payout is a great insurance against living to 105. I tell people when they retire they need to figure out the minimum they need to live on and invest in a guaranteed annuity that will pay that amount (ideally inflation adjusted) until they die. However because annuities are not really a great investment, don't put any more than that in them. Plan for a more normal lifespan.
An annuity or two isn't bad. I'll have one through a long-ago DB pension and another through a charitable trust that wasn't really a great financial "deal" but I wanted to donate and it provides another income stream. But they're pretty much just nice add-ons (in addition to social security of course).
I'm not against annuities, including DB pensions. I just don't think (honestly funded) DB pensions are this fantastic benefit that's been yanked away from people who could have taken the same amount of money and invested it otherwise.
That comes close to being: "Let the professionals handle it and you'll be fine." I mean, I can also pick a financial advisor at one of the major brokerages and they'll take their skim but probably won't do anything really bad.
> It's probably a pretty tenuous connection given a lot of large private sector companies used to have defined benefit pensions too.
They stopped because tax policy was adopted to incentivize more portable, defined contribution plans, as a deliberate effort to both increase retirement insecurity and promote labor mobility.
If I weren't going to start collecting a pension soon from some ago company that by now has gone through a couple generations of acquisitions would I have been paid more at the time? Maybe I guess. But it's very indirect.