In our world today, the majority of us have to work in order to survive and with time, we accumulate experience. At some point, retirement will be necessary. In order to do that, we must have a way of partially replacing the income we had when we were working.
There are many methods of doing this. Some save their whole life so that they can live off their savings when they are no longer working. 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.
What are the different kinds of pensions plans available?
The first is called a Designed Benefit Pension Plan. A certain fixed rate is given that is calculated via a method your pension sum is derived at.
Three separate formula are used to calculate your pension benefit. The first is the flat benefit formula; the second is the best earning average and the final is the career average earning formula.
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.
Only the 2 aforementioned schemes 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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