Pensions

Pensions are programs designed to provide income after retirement. They are typically funded over a person’s working life and can be public (state) schemes, occupational (workplace) schemes, or personal (private) arrangements. In many systems, pensions replace part of pre-retirement earnings to support living standards in old age. Some plans operate on a pay-as-you-go basis, where current workers fund current retirees, while others are funded, with contributions invested to pay future benefits.

Defined benefit plans promise a specific income in retirement, often based on salary and years of service. Defined contribution plans set the amount contributed and accumulate assets; retirement income depends on investment performance and withdrawals. Most schemes offer some form of retirement benefit as regular payments, annuities, or drawdown of accumulated funds, sometimes with a lump-sum option. Retirement ages, indexation of benefits for inflation, vesting, and transferability between employers vary by plan and jurisdiction.

Public pensions typically provide a basic retirement income to eligible citizens, while occupational pensions are arranged by employers and can be portable across jobs if designed accordingly. Personal pensions are funded directly by individuals through financial products such as individual retirement accounts or personal pension plans. Tax treatment and government incentives are common features, influencing participation and saving levels.

Governance and regulation aim to protect beneficiaries, ensure actuarial soundness, and manage investment risk. Long-term demographic and economic trends, such as aging populations and low yields, affect pension sustainability and policy debates, driving reforms toward a mix of funding approaches, retirement ages, and prudent risk management.