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 ?
When the old-age pension benefit was included in 1998, the pension benefit formula was 1 percent by year of service.
Since the revision of old-age pension formula, there have been greater concerns for the solvency of social security fund given the fact that the contribution rates were not raised accordingly.
* Both the state old-age pension from the National Insurance Institute and the payment from your pension fund are deposited into your bank account every month.
* And one more thing: Pensioners who reach the "absolute age for receiving a state old-age pension" (70 for men and 68-70 for women) are not required to make National Insurance Institute payments if they are still working.
The German and Danish models had also been examined by the NSW Legislative Assembly Select Committee on Old-Age Pensions and by John Cash Neild for the NSW government (see further below).
When Premier Sir William Lyne introduced the NSW Old-Age Pensions Bill in 1900, he noted that its provisions were mainly based on the New Zealand Act, which had already demonstrated their practicality.
In order to answer the research questions, the methodology of this study analyzes the scope of the changes that occurred and reveals the factors determining the old-age pension system's development.
Hypothetical Explanations on Old-Age Pension Reforms
(2.) The Minister of Finance (Trevor Manuel) implied in Parliament that black South Africans never received old-age pensions under apartheid (Hansard, February 11, 1999: col.2,042).
In section III, the longevity and saving effects of changes in pay-as-you-go old-age pensions are derived for the two alternative assumptions regarding the existence of fair annuity markets.
Judging from the estimates presented in Table VI.2, old-age pension systems in almost all OECD countries imposed an implicit tax on work from the age of 55 to 64 on average in 1995.
When the House and Senate bills reached conference early in July 1935, negotiators spent a couple of weeks resolving all matters of disagreement in the various welfare programs, the unemployment compensation program, and the compulsory old-age pension program, with the exception of one - the Clark amendment.