Why Companies No Longer Give Workers a Pension

Pensions would seem to be a thing of the past. You may hear an older person talk about getting their pension, but it’s not anything almost anyone these days can access. They used to be fairly commonplace, however, so what changed? Why do companies not offer their workers a pension anymore?

A Brief History of Pensions

A pension is a type of retirement fund that you contribute to throughout the course of your employment (much like today’s retirement plans). When you retire, you begin receiving monthly payments. 

The first formal pensions were offered by the American Express Company in 1875. Companies in other industries followed suit soon after. This continued until 1978 when Congress approved the Revenue Act of 1978 which allowed for 401(k) plans. From that point forward, pensions became less common.

What Replaced Pensions

Companies were growing tired of the expenses involved with offering pensions. 401(k) plans were seen as a more affordable way to offer a similar benefit while also removing much of the burden of responsibility from businesses and shifting it to the employees. Today, 401(k) accounts are among the most common retirement plans. 

Rather than pooling all plan assets together, 401(k) plans feature an account for each employee. Upon retirement, the employee is paid from the funds in the account. 401(k) accounts are funded primarily by employee contributions, though some employers make contributions based on employee contributions.

Why Pensions Are Less Common

There is some overlap between 401(k) plans and pensions, enough that they might seem essentially the same from an outside perspective. From a business’s perspective, however, pensions are not the fiscally smart way to go. Employers must ensure that their pension plans are adequately funded so their former employees have the income they were promised. While the hope is that the interest generated by the contributions takes care of that, that isn’t always how it goes. If the pension plan isn’t performing as expected, the employer has to put more of their own money into the plan. That expense and level of risk aren’t things most companies want to take on, which is why most aren’t willing to offer them anymore. It all comes down to cost.

Pensions were once a common way to fund your retirement, a reward for your loyalty to a single company throughout the years. Most companies don’t offer pensions anymore, however. If you’re one of the many businesses that fall into this category, don’t leave your employees without any retirement benefits. Look into different options for retirement plans so you can still enjoy the benefits of incentivizing employee loyalty.

Did you enjoy reading this article? Here’s more to read. When it’s Time to Hire an HR Professional for Your Company


All Categories

Business Operations

Entrepreneur Interviews

Marketing, Networking, & Social Media

Self Care & Personal Development

Working Moms

Business Software and Technology

Entrepreneurship & Small Business

Organizing Tips


Career Building

Family Businesses


Starting Your Own Business

Work-Life Balance


Hiring Help

Management & Leadership

Time Management & Priorities

Women in Leadership

Recent Posts

Business Blogging 101: How to Create and Sustain a Successful Blog

Business Blogging 101: How to Create and Sustain a Successful Blog

For businesses, business blogging is becoming a powerful tool to not only attract and engage new customers but also to build brand authority and ultimately grow your brand.
This comprehensive guide will equip you with the essential knowledge and strategies you need to start and succeed in the dynamic world of business blogging.

How to Protect Your Merchandise From Theft

How to Protect Your Merchandise From Theft

Protecting your merchandise from theft is a critical aspect of running a successful business. In a world where security threats are ever-present, safeguarding your inventory is essential. Not only does it protect your bottom line, but it also ensures the safety of...

Experts You Need to Have at Your Business

Experts You Need to Have at Your Business

In the dynamic world of business, having the right team of experts is not just beneficial; it is essential for success and growth. For female leaders who are carving out their paths in business, marketing, or HR, knowing which experts to have on board can make a...

7 Tips for Asserting Yourself as a Woman in a Medical Workplace

7 Tips for Asserting Yourself as a Woman in a Medical Workplace

As a woman in a medical workplace, you have a lot of responsibility, not just to yourself but to other women who will come along after you. Asserting yourself in your workplace and gaining the respect of other employees and leadership is essential to a successful career. You have worked hard to get where you are, you don’t want to lose momentum.

Continue to grow with online leadership training and more. Follow these tips to assert yourself in the medical workplace.