Pension Plans Definition, Advantages, Types & Overview

Posted in Human Resources Terms, Total Reads: 1165

Definition: Pension Plans

Pension plans are financial or monetary benefits which an employee gets once they finish their employment term on retirement. Pension plans also referred to as retirement plans. Pension plans are offered by their company or insurance companies to help individuals build a retirement principal sum. On maturity this sum is used or invested for generating an interrupted and regular income source, which is referred to as pension or annuity. It is pension plans that provide individuals with a regular income in their older days. It will provide the financial security to pursue unfulfilled dreams.

Types of pension plans

There are four kind of pension/annuity plans from which a person can choose, which depends upon his personal requirement.

1. Guaranteed period annuity pension plan

2. Life annuity pension plan

3.Deferred annuities pension plan

4.Annuity certain pension plan

1. Employment-based pensions (retirement plans):

Consistent savings over a period of time, till people are in a job, help people for their retirement. Companies offer many types of plans including a defined contribution pension plandefined benefit pension plan or simplified employee pension plan.

2. Social and government sponsored pensions:

Governments of some countries provide money to people through pensions. Non-contributory pension plans are provided by the government or some companies.

3. Disability pensions:

People with special needs also get a certain amount of pension so that they can sustain themselves and their families.

Advantages of Pension Plans

Some advantages & benefits of pension plans are:

1. Pension Plans or Retirement Plans is considered to be the best, safest and surest way to live a life of a trouble-free retirement life.

2. It provides money to retired old people to have a basic standard of living.

3. Pension plans helps elders plan for their medical expenses as well as their personal expenses.

Hence, this concludes the definition of Pension Plans along with its overview.

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