Question

"Pension Plans"

• According to the textbook, the defined contribution plan and defined benefit plan are the most popular pension plans used by employers. Employers have changed from traditional defined benefit plans to defined contribution plans with no major company establishing a traditional pension plan in the past decade. Differentiate between the defined contribution pension plan and the defined benefit plan. What are the major differences in accounting for defined contribution plans and defined benefit plans? Assess the most likely reasons this trend has occurred and the future impact on accounting for pensions.   

Answer 1

The main difference between a defined benefit scheme and a defined contribution scheme is that the former promises a specific income and the latter depends on factors such as the amount you pay into the pension and the fund's investment performance.

When choosing a pension, there are numerous pension plan options available. Whether you are an employer or an employee, an investor or a novice, we have many pensions to choose from which you can see at choosing a pension. Alternatively, our Financial Planning Team can provide you with more information about Zurich's pension plans and options.

defined benefit plans come in two varieties: traditional pensions and cash-balance plans. In both cases, you just show up for work and, assuming you meet basic eligibility rules, you’re automatically enrolled in the plan.