What is a Defined Benefit pension??

Masala

Hi....what is the differance between a Defined Benefit Pension and a Definied Contribution Pension.

I contribute into the Company Pension and get an annual update from the. But there is no definition as above in it.

Also.....a quick question. If I retire at 65 and get a monthly pension but die at 66 will my wife still get my pension.

Thanks

ravima

In very very simple terms, defined BENEFIT means that on retirement you get a percentage, usually 2/3 of your final salary as pension.

Defined CONTRIBUTION means that your pension is based on the value of what you (and possibly your employer) have contributed to a fund.

Normally, pensions is paid for a min of 5 years. You need to read your documentation/talk to your trustees to see if your wife is entitled to a widows pension.

Pablo Sanchez

ravima wrote: »

In very very simple terms, defined BENEFIT means that on retirement you get a percentage, usually 2/3 of your final salary as pension.

Defined CONTRIBUTION means that your pension is based on the value of what you (and possibly your employer) have contributed to a fund.

Normally, pensions is paid for a min of 5 years. You need to read your documentation/talk to your trustees to see if your wife is entitled to a widows pension.

It should be said here re the DB pension you get a % of of your final salary, 2/3 assuming you have been in the scheme for long enough. To get the 2/3rds you usually have to be in the scheme for 40 years.

ravima

Correct Pablo. I forgot that important point, usually, 1/60th salary per year of service up to a max of 40 years.

coylemj

Masala wrote: »

I contribute into the Company Pension and get an annual update from the. But there is no definition as above in it.

What kind of information does the company give you in the annual update?

If the update is personalized for you specifically and says that your fund is now worth xxx euros then you are in a DC scheme.

If they give the numbers for the company as a whole and talk about the fund being under or over funded then you are probably in a DB scheme.

Another pointer to look for is that if the company contributes a fixed percentage of your salary to the fund then it's almost certainly a DC scheme.

In a DB scheme the amount of money contributed by the company varies from year to year depending on whether the fund is fully funded (very rare these days) or under funded.

coffee_cake

OP your company really ought to be giving you this information - it could be very important to you. You're entitled to know about if you have a spouse's pension or not. You should know if you have a DC one so you can supplement extra contributions if necessary, or if you have a DB one you should find out if it's underfunded and maybe think about AVCs.

The definitions given above are correct - DB is a promised pension based on your salary & years of service regardless of the cost; DC is just contributions being paid in as a fixed % of your salary and what pension you get at the end depends on what the fund is worth.

broker2008

Most likely to be a DC scheme. At 65, you will have a number of options available to you. These options for annuities (pension) will determine whether pension dies with you, your wife gets some or all of your pension until she dies. Have a look at itsyourmoney.ie or pensions board for more info.

http://www.itsyourmoney.ie/iym/planningyourpension

http://www.pensionsboard.ie/en/Publications/Information_Booklets/Information_Booklets11.html