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 ?
These data are for all individuals who were employed by someone else, thus excluding self-employed, whether or not they were offered an occupational pension.
In social insurance countries, public arrangements dominate retirement income provision, and the private and occupational pension sectors are relatively small.
A number of these programmes, arranged by employers, stem from the period preceding the occupational pension schemes.
He must explain the unlikely rise of occupational pensions to their present position of significance.
A great deal of uncertainty surrounds the future of the occupational pensions market and much of its progression will also depend on the effects of the government's plans for NESTs in potentially drawing investors away from private pension products.
Anybody who has been a member of an occupational pension scheme for more than 2 years is not entitled to a refund of contributions under the terms of the 1990 Pensions Act.
And on the current rates, these crucial workers could only expect an occupational pension of around pounds 6, 000 a year - even after 40 years' service.
A WEBSITE explaining pensions and what to do if an occupational pension hits trouble has been updated by the TUC.
Analyze developments in the markets for occupational pension products for high income earners, and for private pension solutions.
Contract notice: Service occupational pension provision.
He said: "While attempting to improve pension scheme security, these new rules could actually kill off occupational pension schemes altogether.
AS WE all know, in a few years' time, just when the employed have to start repaying with higher VAT and income tax for the fiscal stimuli set in place last year by Chancellor Alistair Darling, pictured, they will be hit with a compulsory occupational pension scheme which will cost the employed some 4% of their wages.

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