In our world today, the majority of us have to work in order to survive and with time, we accumulate experience. With age, we realize we ought to save for our future when we can no longer work anymore. To retire, we have to have a scheme that will allow us to live comfortably during this period.
Various strategies exist for this purpose. Preparing for the future by working your entire life is one of them. Some people sort out a plan that acts like a salary by bringing in income when they have retired. They call these plans pension plans.
Various types of pension plans described
The first plan is the ?Designed Benefit Pension Plan?. A fixed sum of money is paid periodically after retirement that is arrived at by using formula that helps determine your aggregate pension benefits.
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.
Defined Contribution Pension Plans are another kind of pension plan. Here, a standard amount is paid into an investment account every month. On retirement, a lump sum is received but the amount received will previously have not been known. The amount varies with the amount your scheme is supplemented by an external source. The sum of interest you have earned for your interest too will influence this. Certain pensions permit you to control much of that happens whereas others give a board of trustees this responsibility.
These are the only two registered plans available. Other pension schemes do exist but these vary with your business? performance and affect your pension benefits that way.
Various strategies exist for this purpose. Preparing for the future by working your entire life is one of them. Some people sort out a plan that acts like a salary by bringing in income when they have retired. They call these plans pension plans.
Various types of pension plans described
The first plan is the ?Designed Benefit Pension Plan?. A fixed sum of money is paid periodically after retirement that is arrived at by using formula that helps determine your aggregate pension benefits.
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.
Defined Contribution Pension Plans are another kind of pension plan. Here, a standard amount is paid into an investment account every month. On retirement, a lump sum is received but the amount received will previously have not been known. The amount varies with the amount your scheme is supplemented by an external source. The sum of interest you have earned for your interest too will influence this. Certain pensions permit you to control much of that happens whereas others give a board of trustees this responsibility.
These are the only two registered plans available. Other pension schemes do exist but these vary with your business? performance and affect your pension benefits that way.
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