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What is the Present Relevance of Pension Plans?

Written By Idea Sharing on Wednesday | 12:08 pm

What is the Present Relevance of Pension Plans?

By Beama Life

People have a fixed assumption about pension plans. For them, these are the defined-benefit plans. Variants to such plans if any are not viewed as real-pension plans. Lately, many new retirement plans have come up, but the traditional plans are still what they were, and have not lost their appeal. For some, these traditional pension plans are still the best plans.


All benefits that are stated at the time of giving such plans are guaranteed and are predefined. Such things are calculated on the basis of fixed criteria, rather than staying dependant over the return on investments. This concludes that you shall continue receiving the amount throughout your life and throughout your spouse's lifetime as well.

It would be a good question to ask the types of organizations that offer such plans to people. Or you may ask the reasons as to why the organizations offer such traditional pension plans over the other types? You would be interested to know that all companies want their employees to stay with them for longer durations. Thus, they offer these plans so that the employees see the benefits of working with a particular company. Such plans are not portable in a general sense, and therefore suit those organizations that have less of moving people. Also, pension plans are good for the image of the organization, as it contributes to greater employee trust. This makes them work in a company with assurance of getting a lifetime income.


Employees Seeing Greater Benefits with Plans

Both public and private sectors are into offering pension plans these days. The employees of public sectors have to contribute over 5% of their salary, whereas this trend is not followed by the private sectors. Here, the employees are not required to make contributions to the organization.

In the coming times, the social security systems may be replaced by the traditional best pension plans by the public sector. This states that the employees get higher benefits under their pension, through which they can cover their social security payments. Also, there are the public sector employees who pay social security taxes. In such cases, their actual payable pension is arrived after their number of service years is multiplied by 1.8%. This gives the total amount in terms of salary percentage.

Another reason why pension plans are considered the best is that these are protected, with few limitations. These limitations have been set by the Pension Benefit guarantee Corporation (PBGC). If there are provisions for early retirement of employees within these plans, then it leads to the reduction of payments. This is so because it is from here that the payments are paid for a longer time period. This makes it a tough decision to judge the best one among all the others. It all depends upon individual requirements of organizations.

This can bring in a significant impact on the retirement plans of several employees, as it becomes difficult for them to access their pension benefits as per when they want. This is not much realized by most of the people. Pension plans are there to provide a fixed amount of pension benefit after the retirement of an employee, based on a particular formula.




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