Sunday 19 November 2017

Gap between private and public pensions is becoming a chasm


Willie O'Dea

An urgent need to create alternative funding standard

A defined benefit pension scheme is a contract. The parties to the contract are an employer and an employee and a pension fund. The terms of the contract are that both the employer and the employee pay in a certain amount of money each week to the pension fund, and the pension fund pays out an agreed pension to the employee when he retires.

This usually consists of a percentage of his or her final year's wages. It may or not be indexed- linked for inflation. Of course, in order to meet this commitment, the managers of the pension fund have to ensure that the fund is financially viable. Sometimes a pension fund falls into deficit. That means that the financial obligations (ie liabilities) are greater than the assets.

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