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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary
References in periodicals archive ?
He submitted that "the claimants and many other women born in the 1950s" were not told about the changes "until shortly before their expected state pension age at 60", which caused "significant detriments" to many of them.
If you are or were in a salary-related pension scheme at work (for example, "final salary" or "career average"), or you were in another type of pension scheme at work before April 2012, you are likely to have been "contracted-out" of the additional state pension (this is part of the current state pension system).
PwC found the main reason people would choose to receive a lower state pension amount earlier is to allow them to reduce their hours or give up work.
In the past, women have often found themselves getting a smaller state pension than men due to taking time out of work to care for family members.
For those already drawing the state pension, there will be no change.
The report also estimates that the increase would cover around 60 per cent of the projected rise in spending on the state pension between 2010 and 2046 due to plans to increase it each year in line with earnings rather than prices.
Women are far more likely than men not to qualify for the full basic state pension, which is currently pounds 95.25 a week.
The UK's basic state pension remains linked to the lower inflation rate rather than the much higher national average earnings status, which the state pension should be linked to.
THE state pension is no longer fit for purpose and should be put in "run-off", a report from a think-tank argues.
It noted that state pensions are subject to a "triple lock" for the next five years, which means they would increase at the same level as the highest of three variables: 2.5%, price inflation (CPI) increases, or annual earnings inflation.
In Holland pensioners receive pounds 150 a week in state pensions provision.

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