In the society we live in, most of us go to work in some form or another to get money to live on. As we get older, we amass a lot of work experience. With age, we realize we ought to save for our future when we can no longer work anymore. For us to be able to retire, we have to prepare a method of earning substantial income.
There are many methods of doing this. Preparing for the future by working your entire life is one of them. Other people have plans in place that pay them a certain sum of money periodically when they are no longer in employment. These are referred to as pension schemes.
A description of various pension plans that exist
The first plan is the Designed Benefit Pension Plan. A certain fixed rate is given that is calculated via a method your pension sum is derived at.
Under this plan, the company uses three types of formula for determining benefits. There is a flat benefit formula. This means you get a fixed amount per year of your service. The next formula is the best earning average. This simply means your pension will adjust according to what you have earned over a certain period. As an example, it might figure 3% of your average earnings over a 7-year period. Finally, you have the career average-earning formula. You will receive a fixed percentage of your annual earnings.
The second kind of pension plan is Defined Contribution Pension Plans. Here, you receive a fixed amount in an investment account. When you retire, you get the investments along with the interest earned. The problem with this is you do not know what amount of money you will get when you retire. The amount will depend on how much is added to your plan by some other source or you. In addition, it will depend on the amount of interest you earn on the investment section of the plan. Some of these plans allow you to make decisions and some are made by a board of trustees or other persons in the organization.
The two schemes described above are the only 2 that are registered. Other pension schemes do exist but these vary with your business performance and affect your pension benefits that way.
There are many methods of doing this. Preparing for the future by working your entire life is one of them. Other people have plans in place that pay them a certain sum of money periodically when they are no longer in employment. These are referred to as pension schemes.
A description of various pension plans that exist
The first plan is the Designed Benefit Pension Plan. A certain fixed rate is given that is calculated via a method your pension sum is derived at.
Under this plan, the company uses three types of formula for determining benefits. There is a flat benefit formula. This means you get a fixed amount per year of your service. The next formula is the best earning average. This simply means your pension will adjust according to what you have earned over a certain period. As an example, it might figure 3% of your average earnings over a 7-year period. Finally, you have the career average-earning formula. You will receive a fixed percentage of your annual earnings.
The second kind of pension plan is Defined Contribution Pension Plans. Here, you receive a fixed amount in an investment account. When you retire, you get the investments along with the interest earned. The problem with this is you do not know what amount of money you will get when you retire. The amount will depend on how much is added to your plan by some other source or you. In addition, it will depend on the amount of interest you earn on the investment section of the plan. Some of these plans allow you to make decisions and some are made by a board of trustees or other persons in the organization.
The two schemes described above are the only 2 that are registered. Other pension schemes do exist but these vary with your business performance and affect your pension benefits that way.
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