In the 21st century, a lot of us choose employment in order to meet our basic needs. With years of employment, we become experienced in the job we are doing. 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 a number of ways to do this. Some save their whole life so that they can live off their savings when they are no longer working. Other people have plans in place that pay them a certain sum of money periodically when they are no longer in employment. They call these plans pension plans.
Various types of pension plans described
The first is called a Designed Benefit Pension Plan. A fixed sum of money is paid periodically after retirement that is arrived at by using formula that helps determine your aggregate pension benefits.
Under this plan, the company uses three types of formula for determining benefits. There is a flat benefit formula. This means you get a fixed amount per year of your service. The next formula is the best earning average. This simply means your pension will adjust according to what you have earned over a certain period. As an example, it might figure 3% of your average earnings over a 7-year period. Finally, you have the career average-earning formula. You will receive a fixed percentage of your annual earnings.
Another pension scheme type is the? Defined contribution pension plan? that pays a standard amount from the person's salary into an investment account periodically. The sum of the amount in the account differs according to third party sources that add to it and the interest you receive on that amount.
These are the only two registered plans available. Other pension schemes do exist but these vary with your business? performance and affect your pension benefits that way.
There are a number of ways to do this. Some save their whole life so that they can live off their savings when they are no longer working. Other people have plans in place that pay them a certain sum of money periodically when they are no longer in employment. They call these plans pension plans.
Various types of pension plans described
The first is called a Designed Benefit Pension Plan. A fixed sum of money is paid periodically after retirement that is arrived at by using formula that helps determine your aggregate pension benefits.
Under this plan, the company uses three types of formula for determining benefits. There is a flat benefit formula. This means you get a fixed amount per year of your service. The next formula is the best earning average. This simply means your pension will adjust according to what you have earned over a certain period. As an example, it might figure 3% of your average earnings over a 7-year period. Finally, you have the career average-earning formula. You will receive a fixed percentage of your annual earnings.
Another pension scheme type is the? Defined contribution pension plan? that pays a standard amount from the person's salary into an investment account periodically. The sum of the amount in the account differs according to third party sources that add to it and the interest you receive on that amount.
These are the only two registered plans available. Other pension schemes do exist but these vary with your business? performance and affect your pension benefits that way.
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