Defined Benefit and Contribution Pension Plans

Differences along with advantages and disadvantages of both

  • 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 loses.
  • A defined benefit plan promises the participant a specific monthly benefit at retirement and may state this as an exact amount. Monthly benefits are calculated through a formula that considers a participants salary and service. Unlike defined contribution plans, the participant is not required to make investment decisions. A defined benefit plan is sometimes referred to as a fully funded pension plan.

Advantages of Defined Benefit Plans [Lees meer…] overDefined Benefit and Contribution Pension Plans

Collective defined contribution pensionplan in the Netherlands

Up until now, workers in the Netherlands have typically been covered by industry-wide defined benefit plans. These plans are administered by boards which include representatives of employers, workers, and retirees. Together with the Dutch social security benefit, these traditional plans are designed to provide a total replacement rate of 70 percent of preretirement salary. [Lees meer…] overCollective defined contribution pensionplan in the Netherlands