Defined Benefit Vs Defined Contribution

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Pension Funds can be either a Defined Benefit Fund or a Defined Contribution Fund. This video gives a brief explanation of the two and compares which one is better.
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Just what I was looking for; very clear & straightforward information, thanks a million for sharing ;)

HealthifyCoach
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You may not think it but this video cleared up a lot of things that the books couldn't! Thanks for the tips Bro! Time to ace this exam

forgotmyusername
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The full amount of a defined contribution can be left to your wife or anyone else if you are not married, A defined benefit is gone when the employee dies minus the surviving spouses share which is usually 1/2. That is the reason why many people prefer Defined Contribution plans.

darrinrentruc
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Hey. Nice video bro. I'm preparing for my CA1 exam hence the keen interest in your videos which I use for revision. At minute 3:40' you mentioned that there is no risk for the employee on a DB pension scheme. I was of a similar opinion until my professor clarified this out. Although a DB pension is not directly exposed to the investment and annuity risks of a DC pension, it is not risk‐free. The various risks are highlighted below:

• If an employee leaves the employer before retirement, he will get a deferred pension based on salary and service at termination. This is often a less generous benefit, per year of service, than provided in a DC scheme particularly for younger individuals with many years to retirement.
• If the company goes bankrupt, an employee’s accrued pension rights would be at risk if the scheme were under‐funded. This risk is not present in a DC scheme, as each member has their own individual account (which is, in effect, fully funded at all times).
• If the scheme is still operating when an employee retires, his pension will depend on his final/ career average salary which may be lower than expected.
• DB Pensions in deferment and payments may not be fully indexed to inflation, and hence subject to inflation risk.

A more useful way of assessing the benefits offered by different schemes would be to compare how much the employer has been contributing to each one. However, people should also compare the death and ill‐health benefits which may be more generous in the DB scheme.

johnmnjoroge
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THANKS SO MUCH! I love the simplicity of the video.

candilocz
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Well explained, very clear and easy to understand thank you!

chaithramh
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what if the company goes bankrupt a few years after retirement?, is there risk of losing db?

SuperStubug
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With DC plans, is the employee required to make contributions?

jusTOOfresh
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What about if you are a risk lover? It gonna be better a DC anyways.

sebahard
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!!! Are you paid every month with defined contribution? I understand you put your own money in and everything, but no one ever specifies sharply that you do or don't get paid monthly with DC.

mommy
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Defined benefit fund. The calculations are very confusing. 😗

roberthiggins