pensionsplan

A pensionsplan, or pension plan, is a retirement savings arrangement that provides a regular income to individuals after they stop working. These plans are typically established by employers for their employees, although some individuals may also set up personal pension plans. The primary goal of a pensionsplan is to ensure financial security for people in their later years.

There are two main types of pensionsplan: defined benefit (DB) plans and defined contribution (DC) plans. In a defined benefit plan, the employer guarantees a specific retirement income based on factors like salary history and years of service. The employer bears the investment risk and is responsible for ensuring sufficient funds are available to pay the promised benefits. In contrast, a defined contribution plan involves regular contributions from either the employee, the employer, or both, into an individual investment account. The retirement income from a DC plan depends on the total contributions made and the investment performance of those contributions. The employee generally bears the investment risk in a DC plan.

Pensionsplan contributions are often tax-advantaged, meaning that the money contributed may not be taxed until it is withdrawn in retirement. This encourages saving for the future. Upon retirement, benefits from a pensionsplan can be paid out as a lump sum or as a series of regular payments, often referred to as an annuity. The specific rules and regulations governing pensionsplan vary by country and jurisdiction, with governing bodies overseeing their administration and solvency to protect the interests of beneficiaries.