A retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.
Retirement plan which provides an individual account for each eligible participant including a participant's required contribution,an employers contribution and the earnings on those contributions.
A plan that provides an individual account for each participant and benefits based solely on (1) the amounts contributed to the participant's account plus (2) any income, expense, gains and losses, and reallocated forfeitures.
A defined contribution pension scheme is a scheme where the defined amounts are what the member and/or employer pays in. The pension the member will get at retirement is unknown in advance and will depend on the accumulated value of the member's pension account and the cost of buying a pension when they retire.
A defined contribution plan provides an individual account for each participant. The benefits are based on the amount contributed and are also affected by income, expenses, gains, and losses.
A pension scheme where the individual receives a pension based on the contributions made and the investment return that they have produced. These are sometimes referred to as money purchase schemes. Employer-sponsored scheme A pension scheme which is organised through the employer, enabling pension contributions to be made through the payroll. Often the employer will also make a contribution. An employer sponsored-scheme can either be occupational or contract-based in nature.
A defined contribution plan does not promise a specific benefit at retirement, but does provide regular, set contributions to a pension fund. Defined contribution plans tend to be less expensive than defined benefit plans.
Pension plan in which employees and employers may contribute, with retirement payouts determined by how well the investment performs. A 401(k) or 403(b) plan.
A retirement benefit that is based on the amount contributed and the performance of the investments chosen. Investment returns (both gains and losses) are applied to the account.
In a defined contribution plan, the amount of the contribution is defined by the plan rather than the benefit. In other words, you "know" how much goes into the plan (or at least the formula for determining it), not the benefits that may eventually be paid out. A defined contribution plan has individual accounts for each participant in the plan, another key difference from defined benefit plans. Also, both employer and/or employees may contribute to a DC plan (employee contributions to defined benefit plans are rare). These contributions are invested at the direction of the employer (as in most profit-sharing plans), the employee (as in 401(k) plans) or according to the plan itself (employee stock ownership plans, or ESOPs). The employee benefits directly from any investment gains in the individual account—or suffers from any investment loss. There is no "insurance" for these benefits, as there is with defined benefit DB plans.
Another term for 'money purchase' pensions. A pension scheme where the final pension will be the result of an agreed premium input, rather than an agreed formula output.
Type of occupational pension scheme, also known as a Money Purchase Plan. You and/or your employer contribute to the scheme, which is then invested. The value of the pension is based on the contributions paid and how well the investments have performed. Your pension value is not guaranteed as it partly depends upon investment performance.
One type of pension plan is called defined contribution. With this plan employee get only what has been placed in the trust and what has been earned by the trust, no more, no less. The employer has no responsibility beyond what is in the contributed trust.
An occupational pension scheme where the contributions made by the employer and employee are set and the final pension an employee receives depends on the size of their fund on retirement. This final fund is then used to buy an annuity. Also referred to as Money Purchase schemes.
These schemes do not promise to pay benefits relating to salary at retirement. Each member of a money purchase scheme has his own earmarked funds to which he and the employer contribute. At retirement the pension purchased will be determined by how much money the member has in his earmarked fund.