Pension

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Pension

A retirement plan in which an employer makes a contribution into an account each month. The contributions are invested on behalf of an employee, who may begin to make withdrawals after retirement. Typically, pensions are tax-deferred, meaning that the employee does not pay taxes on the funds in the pension until he/she begins making withdrawals. Pensions may have defined contributions, defined benefits, or both. See also: 401(k), IRA.

Pension.

A pension is an employer plan that's designed to provide retirement income to employees who have vested -- or worked enough years to qualify for the income.

These defined benefit plans promise a fixed income, usually paid for the employee's lifetime or the combined lifetimes of the employee and his or her spouse.

The employer contributes to the plan, invests the assets, and pays out the benefit, which is typically based on a formula that includes final salary and years on the job.

You pay federal income tax on your pension at your regular rate, so a percentage is withheld from each check. If the state where you live taxes income, those taxes are withheld too. However, you're not subject to Social Security or Medicare withholding on pension income.

In contrast, the retirement income you receive from a defined contribution plan depends on the amounts that were added to the plan, the way the assets were invested, and their investment performance.

The way a particular plan is structured determines if you, your employer, or both you and your employer contribute and what the ceiling on that contribution is.

pension

a payment received by individuals who have retired from paid employment or have reached the government's pensionable age, in the form of a regular weekly or monthly income, or as a lump sum. There are three main types of pension scheme:
  1. state retirement pensions operated by he Government, whereby the employee pays NATIONAL INSURANCE CONTRIBUTIONS over his working life, giving entitlement to an old age pension on retirement of an amount considered to provide some minimum standard of living. State pensions may be based on earnings or may be a flat rate, or combination of the two. See DEPARTMENT FOR WORK AND PENSIONS;
  2. occupational pensions operated by private sector employers whereby the employee and the employer each make regular contributions to a PENSION FUND or INSURANCE COMPANY scheme, the pensioner then receiving a pension which is related to the amount of his contributions (annual contributions x number of years worked).

    Occupational pensions take two main forms:

    1. defined benefit, where the pension is linked to final salary. Here the employer is liable to make up any shortfalls in the PENSION FUND. This type of scheme is also known as a ‘final salary’ scheme.
    2. defined contribution, or money purchase scheme, where the size of contributions but not the final pensions benefits are fixed. The size of pension benefits are determined by the investment performance of the fund. The employee rather than the employer bears the risk.

    In the UK there is a shift from defined benefit to defined contribution schemes, because of employer fears about their future liabilities;

  3. personal pension plans (PPP) operated by insurance companies, pension funds and other financial institutions which provide ‘customized’ pension arrangements for individuals depending on their personal circumstances. Since a PPP scheme is not tied to a particular employer the problem of transferring pension rights should the person move jobs is much reduced. A recent innovation in the UK is the ‘stakeholder pension’, aimed at low and medium income earners who work for employers who do not already have an occupational scheme. Employers with more than 5 employees are obliged to designate a ‘stakeholder pension’ provider for their workforce but they are under no obligation to make contributions to the scheme. Nor are employees obliged to subscribe. Approved providers of stakeholder pensions are required to levy low charges to participants. See CONTRACTING OUT.

pension

a payment, received by individuals who have retired from paid employment or who have reached the government's pensionable age, in the form of a regular weekly or monthly income or paid as a lump sum. There are three main types of pension scheme:
  1. state retirement pensions, operated by the government, whereby the employee pays NATIONAL INSURANCE CONTRIBUTIONS over his or her working life, giving entitlement to an old-age pension on retirement of an amount considered to provide some minimum standard of living;
  2. occupational pensions, operated by private sector employers, whereby the employee and employer each make regular contributions to a PENSION FUND or INSURANCE COMPANY scheme, the pensioner then receiving a pension that is related to the amount of his or her contributions (annual contributions x number of years worked);personal pension plans (PPP), operated by insurance companies, pension funds and other financial institutions, that provide ‘customized’ pension arrangements for individuals depending on their personal circumstances. Since a PPP scheme is not tied to a particular employer, the problem of transferring pension rights should the person move job is much reduced.

Pension

Payments made periodically of (generally) a definite amount for a specified period (usually life) from an employer-funded plan to workers who have met the stated requirements. Its primary purpose is to provide retirement income.
References in periodicals archive ?
It was only last month that the state government informed the Punjab and Haryana High Court of 71,426 fake beneficiaries tapping into its old age pension scheme which gives ` 250 per month to the elderly.
For example, when Richard Seddon first introduced New Zealand's old age pensions legislation into parliament during 1897, he referred to British evidence to emphasise how unworkable contributory schemes would be, and doubly so for women homemakers.
Now, President Bush wants to throw future old age pension entitlements overboard and bring what is called "privatization" to the pension system.
Firstly, we have significantly increased old age pensions.
The demand for tax-funded old age pensions was taken up by the labour movement, which considered it a moral obligation of the state to provide old age pensions.
Before the Old Age Pensions Act was passed in August 1908, those who could no longer earn their living due to the fragility of age depended wholly upon charity to survive.
Contributory old age pensions will now rise by EUR 16 a week to EUR 209.
1909: Chancellor David Lloyd George introduced a "supertax" of sixpence (2 1/2 p) in the pound for anyone earning more than pounds 5,000 a year, to pay for old age pensions and re-armament.
1908: Prime Minister Asquith introduced old age pensions for people over 70.
When historians look back on the activities of the pre-1914 Liberal Government in Great Britain, they are most likely to emphasize the manner in which David Lloyd George (as Chancellor of the Exchequer) and his colleagues laid the foundations of the twentieth-century "welfare state" in the form of old age pensions, government-operated labor exchanges, a system of contributory national health insurance, a pioneering program of unemployment insurance, and the earliest example of the progressive income tax.
CHANCELLOR Gordon Brown is set to increase old age pensions by a handsome 13 per cent.