LSE BSc IV

Retirement/Pension Plans

By:

Abdul Rafeh Iqbal

Abdul Hadi Sheikh
Arif Sajjjad
Asad Mujeeb
Umar hafiz
History of Pension Plans

When discussing the History of Retirement/Pension Plans one would succumb to the fact that,
they were created in the late 20th century or even for a wilde guess the 19th century, but the true
history lies long before any one of us can imagine.
Augustus, A decorated Roman King created a formal pension plan in 13th century BC, it required
each personnel/ legionnaire to complete 16 years in a legion and then 4 years in a military
reserve. After their service to the empire, they were given pension in the form of land and money
(Gold Coins). By 5th century AD, Augustus and his advisors created a special fund which was
meant to finance the same pensions plans. This was a huge success because of the orderly
disibursement from the empire’s reserves. Later on, with the fall of the Roman empire these
pension plans also vanished.
A type of Pension plans were again seen during the end of the 16th century when the British
Parliament established ‘Relief for Soldiers’. These were military pensions and were not
Retirement based, rather they were disability based. They were given the famous British ‘Half-
pay’ name as their pension type/form. This concept of giving the soldeir’s half-pay became a
system in itself and was adopted by many countries including France & Prussia.
The concept of a life Annuity, fixed-full payment and interest-bearing Bond were initially
created during the Revolutionary War Era (1781-83) but none could never come into practice
because of the country’s financial situation.
In the early 1860’s, America faced another tragedy, the states of America engaged themselves in
a civil war which was tearing it apart bit by bit. The Unionists & Confederates both were in
search of attracting recruits for their armies and there came an idea of magnetizing civilians
towards the armies. Offer generous Retirement pensions to recruits & their widows! The plan
worked like clock-work and thousands of soldiers joined the fight.
Later the Lincoln administration passed the 1st General Army Retirement plan which limited to
40 years of service or if the formal retirement board deemed the person not-fit for service, then
75% of base salary would be paid after retirement. By 1885, the army disability plans were also
merged with the Retirement plan which also included commissioned officers.

.
The United States Social Security
The 1930’s saw for America an era of Franklin D. Roosevelt, Roosevelt wanted an immediate
response to the Great Depression and his focus was on the 3 R’s; Relief, Recovery & Reform.
The Social Security Number concept was coined in a series of economic programs famously
recalled as the ‘New Deal’. Within 3 months of the 1st issuance, 25 million numbers were issued.

Since, then there have been a lot of changes in the Social Security Number portfolio. Initially the
SSN (Social Security Number) had one original purpose, to track individual records within the
Social Security program. With time, it the Government started making the SSN as an
Identification number because US Citizens started applying for SSN of their children of quite a
young age. The SSN came to include the original disability Pension, for Federal Tax Purposes
etc. Today the Social Security Number provides a large variety of Social Welfare & Social
Insurance programs intended to maintain the Standard of Living of an American Citizen.

The Insurance side is propelled at providing programs of the likes of Temporary Assistance for
Needy Families, State Children’s Health Insurance Programs &Health Insurance for Aged &
Disabled. Whereas the Welfare Programs are geared to supply programs like Supplemental
Security Income & the Unemployment benefits and the Federal Old-Age, Survivors & disability
Insurance (OASDI) program.

Retirement Benefits
Throughout a worker’s career, the Social Security Administration keeps a track of individual
earnings. The retirement plan fund is gathered through the practice of payroll taxes, which is
called FICA or Federal Insurance Contributions Act Tax. The employer’s/firm’s are required to
withhold;

1. Federal Income Tax

2. ½ of the Social Security Tax

3. ½ of the Medicare Tax

The Retirement benefit is based on the earnings record & the age at which a SSN holder opts to
begin receiving the benefits.

The Retirement benefit in detail is based on the Insurance Primary Amount (PIA). This amount
is taken as the averaged highest of 35 years of the worker’s earnings. 1/12th of the PIA is
considered as the average indexed monthly earnings (AIME).
The Insurance Primary Amount is the earnings if an employee reaches his/her retirement age, the
worker gets his retirement benefit in 3 parts of the AIME which are calculated in a procedure.

Calculation of Bend points (2010)

1st Bend Point

1st Bend point of base year 1979 (180) * AWI 2008/ AWI 1977

2nd Bend Point

2nd Bend Point of base year 1979 (1,085) * AWI 2008/AWI 1977

The PIA is a sum of;

a. 90% of 1st bend point of the AIME+

b. 32% the amount between 1nd & 2nd Bend Point of the AIME

c. 15% of the amount above the 2nd Bend Point of the AIME

There is a limitation by the Social Security Administration in this procedure, it is the maximum
cut to the earnings that can be used for the calculation of PIA. It is called the Social Security
wage base, it was $102,000 is year 2008 and $106,800 since the past 2 years.

Apart from the Primary Insurance Amount (PIA) formula, there is another by the name of
maximum family benefit formula which takes on 3 bend points and provides a higher percentage.
United States (Private)
Types of Private Retirement Plans
Over the years there have been an edifice of differentiated retirement plans, some have been
amended due to changing lifestyles and societal demands whereas there have been creation of
plans over the years. There are some meant to support employees and then there are individual
retirement plans.

Individual Retirement Plan:

Individual Retirement Plans are based for those citizens who have their own business’s, which
are small and medium and do not involve a very minimal set of employees. Furthermore it is also
provided for those citizens who are employees of firms which do not provide any
retirement/pension plans. The individual retirement plans for divided in 2 sub-categories.

IRA (Individual Retirement Accounts), these are accounts available by banks/pension firms.

• Basic IRAs: A taxpayer can contribute up to e.g $4,000 per year in an IRA ($5,000 for
following year and after following year, the contribution limit will adjust annually for
inflation in $500 increments. For taxpayers aged 50 and over, the law provides an
increase in the contribution limits applicable to IRAs). This contribution by the taxpayer
is tax deferred; the contribution is tax exempt until the taxpayer withdraws this money at
retirement.
• Roth IRAs: the Roth IRAs are named after the former Senator William V. Roth were
formed as a conclusion to the Taxpayer Relief Act ’97. Roth IRA is similar to a
traditional IRA except that the original contribution is not tax deductible. However, the
investment earnings of Roth IRAs are not taxed when money is withdrawn at retirement.
But then there are restrictions as to what income bracket can apply or go for a Roth IRA,
($110,000 for singles, and $160,000 for married couples filing jointly).
Employee-Sponsored Retirement Plans

Employer-Sponsored Retirement plans are based for those employees who are working in firms
which support/offer Retirement plans as a subject of their employment contracts. A note to be
mentioned here is that more popular retirement plans are the employer-sponsored retirement
plans as almost all firms in the US provide such plans as part of their employment package to
attract the most beneficial employee. There are 2 main categories which exist and the Defined
contribution (DC) plans are sub-categorized further.

• Defined Benefit Plans (DB): A defined benefit plan promises an employee a specific
monthly benefit at retirement. This monthly benefit can be an exact dollar amount, or be
calculated through a formula that considers a participants salary and years of service. The
contributions of the employee are invested in the financial markets by the employer/firm
by themselves and the Investment risks and portfolio management are entirely under the
control of the firm; this is generally mentioned in the employment contract. There are
restrictions on when and how you can withdraw these funds without penalties. Defined
Benefit plans were popular in 1950s and 1960s. However, since the passage of ERISA
(Employee Retirement IncomeSecurity Act) in 1974, more and more firms have adopted
defined contribution plans (DC).

• Defined Contribution Plans (DC): In DC plans, the employee and/or the employer
contribute to the employee's individual account under the plan. These contributions
generally are invested in mutual funds or, in some cases, the stock of employer’s firm. As
a result, the size of the retirement account is also determined by the investment
performance of those mutual funds and appreciation in the company's share price.
Balances accrue in Defined Contribution plans belong to individual employees, who
direct the investments and bear the risk of fluctuating asset returns.
o 401(k) Plans: 401(k) is the most common type of employer-sponsored retirement
plan. It is usually funded with before-tax salary contributions and often matching
contributions from the employer firm are deposited in the plan. Both the firm
contributions and any growth in the 401(k) are tax-deferred until withdrawn.
Employee contribution limit is the lower of the maximum amount the
employer/firm permits. The total contribution to the 401(k) account from all
sources combined, including any employer matching or profit-sharing
contributions, and any employee after-tax contributions is the lesser of 100% of
compensation or $42,000 for year 2005. These values are restrictions and are
edited for every year.
o Profit Sharing Plans: A Profit Sharing Plan is a retirement plan in which the
contributions are made solely by the employer/firm. The firm has the flexibility to
contribute and deduct between 0% and 25% of eligible employee’s compensation
up to a maximum each year.
o SIMPLE Plans: (Saving incentive match plan for employees) is a type of pension
plan that may be implemented by self-employed individuals or employers with
100 or fewer employees. It works similarly to a 401(k) plan. The maximum
amount any qualified employee can contribute to a SIMPLE plan is $10,000 per
year in 2005. The employer matches 100% of employee deferrals up to 3% of
compensation.
o ESOP Plans: An (Employee Stock Ownership Plan) is a form of defined
contribution plan in which the investments are primarily in employer stock.
o Money Purchase Pension Plans: A Money Purchase Pension Plan is a retirement
plan that requires fixed annual contributions from the employer to the employee's
individual account.
o SEPs: A simplified employee pension (SEP) is a very common retirement plan for
self-employed individual and small businesses. A SEP is basically a group of
IRAs; Individual Retirement Accounts, it allows employers to make contributions
to their own IRA and to IRAs that their employees set up and control. Generally,
employees can make contributions of up to $42,000 a year or 25 percent of
compensation, whichever is lower.
UK pension provisions
Public provisions:
The Basic State Pension
The basic State Pension offered by the UK government is the main benefit offered by the State Pension
system. In order to qualify for a State Pension you must first have a National Insurance number. One sent
to you automatically if you are a UK citizen, but you will need to apply for a number if you are a foreign
national then you will need a National Insurance Number. Once you have a number, you will be required
to make National Insurance contributions. The contributions you make will depend on how you work and
how much you earn which we will later discuss in the National Insurance Contribution Classes. If you are
a volunteer development worker or a share fisherman, you will be required to pay special contributions. If
you are unable to work you may qualify for National Insurance credits, or Home Responsibilities
Protection (see Home Responsibilities Protection). Once you have reached the required age you can file a
claim on your State Pension.

National Insurance Contributions

National Insurance contributions are sums of money that you pay to the National Insurance from your
earnings. The amount that you are required to pay depends on how you earn your money and how much
you earn. You are required to pay National Insurance contributions in order to ensure that you are entitled
to receive certain state benefits if you need them and the State Pension when you retire. The contributions
you make are not direct savings for your own pension: the contributions that taxpayers make today are
paying for the pensions of today. The pensions of the future will be paid for by the taxpayers paying
contributions in the future. Anyone employed or self employed who earns more than the Lower Earnings
Limit on the government’s scale of earnings is required to pay National Insurance (N.I.) contributions.

Currently you must make N.I. contributions for ninety percent of your working life to be entitled to claim
a full State Pension. Your working life is calculated as the tax years of your life between age sixteen and
the State Pension Age. Every tax year that you pay National Insurance contributions goes onto your
National Insurance record. When you come to retire, the number of qualifying tax years on your record
dictates the percentage of the full State Pension to which you are entitled. The tax year goes from the 6th
April to the 5th April the following calendar year.

If you are required to pay contributions but fail to do so, you will have to pay late contributions and you
may incur a fine. If you are employed, your N.I. contributions should be deducted from your gross salary
automatically by your employer. You will have to pay N.I. contributions on any earnings which fall
between the Lower and the Upper Earnings Limits. The Lower Earnings Limit is currently set at £4,524 a
year, and the Upper Earnings Limit at £34,840 a year. If you have more than one job with a salary which
falls between these limits you will have to pay N.I. contributions on each salary.
 Limits Description
Lower Earning The Lower Earnings Limit. This is the minimum amount of money you must
earn each week in order to be credited with National Insurance contributions as
Limits
an employee, and thus build up your rights to a State Pension (£87 a week)

The Primary The Primary Threshold sometimes referred to as the Earnings Threshold or ET.
This is the level of earnings at which you begin paying National Insurance
threshold
contributions as an employee, and thus build up your rights to a State Pension
and other benefits that are based on your National Insurance record (£ 100)

The Secondary The Secondary Threshold. This is the level of earnings at which you begin
paying National Insurance contributions on your employees’ earnings as an
Threshold
employer. This threshold is currently set in line with the PT, at £100 a week.

Upper Earning Upper Earnings Limit. This is the maximum amount of earnings on which an
employee is required to pay full rate N.I. contributions. Above the UEL N.I.
Limit
contributions are reduced from 11% of your earnings to 1% of your earnings

(UEL is £34,840 a year.)

National Insurance Contribution Classes

Class One

• If you are aged between sixteen and the State Pension Age and are employed you will
pay class one contributions.
You and your employer pay N.I. contributions, which your employer deducts from your
gross salary and sends to Her Majesty’s Revenues and Customs. Not sending these
contributions is a criminal offence and could result in prosecution.
• Class one contributions are calculated as a percentage of your earnings which fall
between the Lower Earnings Limit, currently £87 a week, and the Upper Earnings Limit,
currently £670 a week.
• Currently class one contributions for employees are 11% of earnings between the Lower
Earnings Limit and the Upper Earnings Limit and 1% of earnings above the Upper
Earnings Limit.
• If you earn more than the Lower Earnings Limit but less than the Primary Threshold,
currently £100 a week, you will be credited as having paid class one contributions
without being required to actually pay them.
• These contributions count towards Jobseeker’s Allowance, Incapacity Benefit,
Bereavement Benefits, Maternity Allowance, the State Pension and the State Second
Pension.
Class Two

• If you are self employed and your earnings are not low enough to exempt you from N.I.
contributions, you will pay class two contributions.
• These are currently £2.20 a week, and are usually paid monthly via Direct Debit.
• You may be required to pay a different class two rate if your work is specialized. See
Specialized Class Two Contributions.
• If you do not pay these contributions when you are required to do so, you may face a fine
or even prosecution.
• You may be required to pay class four contributions as well as class two contributions.

Class Three

• These contributions are voluntary and for the tax year 2007/2008 is set at £7.80 a week.
• You can pay these if your earnings are very low and you are thus not required to pay N.I.
contributions but are equally not entitled to N.I. credits. See National Insurance Credits.
• You can also choose to pay class three contributions if you have gaps in your National
Insurance record, perhaps from time spent studying or travelling.
• If you are unsure as to whether you should pay class three contributions, contact your
local Citizens Advice Bureau for help.
• These contributions count towards bereavement benefits and the State Pension.

Class Four

• If you are self employed and earn more than a certain amount each year, known as the
Lower Profits Limit, you will pay class four contributions in addition to class two
contributions.
• Class four contributions are calculated as a percentage of your earnings which fall
between the Lower Profits Limit, currently set at £5,225 a year and the Upper Profits
Limit, currently set at £34,840 a year.
• Currently class four contributions are 8% of earnings between the Lower Profits Limit
and the Upper Profits Limit and 1% of earnings above the Upper Profits Limit.
• These contributions do not count towards any benefits, but you are required to pay them
nonetheless.

Married Women’s Contributions

• If you are a married woman or a widow, you must have applied to pay reduced rate N.I.
contributions before the 21st May 1977.
• If you chose to do so, you are entitled to pay reduced rate class one contributions of
4.85% of your earnings between the Lower and Upper Earnings Limits and 1% of your
earnings above the Upper Earnings Limit.
• If you are self-employed and registered for married women's contributions you do not
need to pay class two contributions.
 • You may be entitled to less state benefits and a lower rate State Pension as a result of
these reduced contributions.
• If you are considering changing to full-rate contributions in order to build up more State
Pension or State Second Pension contact your local Citizens Advice Bureau for
assistance.

National Insurance Credits:

If one is unable to work because he is ill or caring for others, unemployed but seeking work, on maternity
or adoption leave, on jury service or finishing secondary school, he may be entitled to National Insurance
credits. These are class one contributions that you are credited as having paid, although you have not.
National Insurance credits ensure that anyone in a difficult situation will not have gaps in their National
Insurance record which prevent them from qualifying for benefits or for the full State Pension.

State Pension Age:

The state pension age is the age when you can file for your pension claim and start drawing your state
pension. Currently the age is set at 60 years for women and 65 years for men. Between 2010 and 2046,
State Pension age will increase and equalize to sixty-eight years of age for both men and women

Claiming State pension:

Even if you are entitled to receive State Pension, you will not automatically begin receiving it: you must
claim your State Pension. You should receive a claim form from the Department for Work and Pensions
shortly before you are due to reach the State Pension age. Once you have completed and returned the
form, you should start receiving your pension when you have reached State Pension age. Your State
Pension will be paid into your bank, building society, National Savings or Post Office® account by direct
debit. One does not have to begin withdrawing your State Pension when you reach State Pension age.
You can defer taking your pension, entitling you to claim a higher pension benefit or a one-off lump sum
when you begin claiming it later on

For 2009/2010 the full State Pension is set at £97.65 a week for singles and £195.60 a week for couples,
which assumes one full pension and one full married woman’s pension. Remember, State Pension
increases each year on a level with inflation, so the amount of State Pension given in the future will not
match the current figures given above. If you do not qualify for a full State Pension because you do not
have enough qualifying years on your National Insurance record, you will get a reduced State Pension
between the minimum and maximum amounts for the current tax year. For 2007/2008 the minimum
pension is £31.83, and the maximum is £97.30.
State second pension (previously SERPS)
The State Second Pension, previously known as SERPS (until April 2002) and currently referred
to as S2P, but also known as the State Additional Pension, is a pension paid by the government
in addition to the basic State Pension. State Second Pension is a scheme which tops up your basic
State Pension. SERPS calculated your additional bonus according to how much you earned and
for how many years you had made National Insurance contributions. S2P also considers your
earnings, but importantly it also takes into account time spent out of work for legitimate reasons
such as illness. S2P helps both those in employment and those unable to work either because
they are currently incapable or because they are currently caring for others. Those who fall into
these categories are given the chance to earn an extra benefit on top of their basic State Pension
without being required to contribute anything.

The scheme has undergone a many changes, and it is very difficult to know which varieties of
State Second Pension you are entitled to, and how much you will gain from each. Currently you
can build up State Second Pension (S2P) if:

• You earn at least £4,524 (in 2007/2008) throughout the tax year
• You care for one or more children younger than six years of age, and claim child benefit
throughout the tax year
• You are a career throughout the tax year for someone who is ill or disabled
• You are unable to work due to long-term illness or disability, are entitled to benefits as a
result, throughout the tax year, and have been earning for at least one tenth of your
working life

Calculating S2P
If one earns £4,524 or more (in 2007/2008) then your S2P will be calculated as a series of percentages
based on where your earnings fall on the earnings scale set out by the government, see The Earnings
Scale. Using this earnings scale the S2P is calculated as shown below for earnings in a tax year
If one is earning more than the LEL but less than the LET, you will be credited as having earnings equal
to the LET. This means that if you earn only £10,000 in 2007/2008 you will be credited as having earned
£13,000 and be entitled to S2P based on that amount, that is, forty percent of £8,476 (LET of £13,000 –
LEL of £4,524 = £8,476), which is £3,390.40 S2P a year or roughly £65 a week. If you earn £20,000 a
year, you are entitled to forty percent of your earnings which fall between the LEL and LET, and ten
percent of your earnings which fall between the LET and UET:

A citizen will have to claim his/her State Second Pension at the same time as you claim your Basic State
Pension. The forms should be sent out to you automatically, shortly before you reach State Pension Age

Pension Credit:

Guarantee Credit:

Guarantee Credit ensures that every pensioner’s retirement income exceeds the Minimum Guarantee set
out by the government. The Minimum Guarantee is the minimum amount of money that the state
considers you should have to live on. The Minimum Guarantee for 2007/2008 is set at £119.05 a
week for single people and £181.70 a week for couples. In this case if you are living together as a
couple you are considered a couple for the purposes of Pension Credit: your relationship must not be
legally recognized, that is, you must not be married or be civil partners. The Minimum Guarantee is
lower for couples than for two single people because it is assumed that couples will be sharing
household expenses. The Minimum Guarantee may be higher if you are severely disabled, if you are
working as a career or in some cases if you need help covering housing costs: in these cases you may
be entitled to receive more Pension Credit. The Minimum Guarantee is increased annually in line
with the earnings national average.

Savings Credit:
Savings Credit encourages people to save for their retirement and not rely on State Benefits for their
income. If you are over sixty-five years of age you can claim sixty pence of Savings Credit for each
pound of income you have which falls between the State Pension and the Minimum Guarantee. This
means that you can have a maximum of (£119.05 - £87.30) x 0.60(2008 figures) = £19.05 Savings Credit
a week for 2007/2008. However, the first £6,000 of your savings do not count when your entitlement to
Pension Credit is calculated; similarly, the first £10,000 of your savings do not count if you are living in a
care home. For every £500 of savings you have over the limit, the government assumes £1 of retirement
income a week. There is no upper limit to your savings after which you are not entitled to claim Pension
Credit.

United Kingdom – Private/Non-State Pension Provisions

Background

With a continual rise in life expectancy and supplementary to that, a decline in fertility rates, a major
segment of population in UK is now increasingly falling in the post-retirement category. And, a system of
fund arrangements is necessary for provision of adequate lifestyle to this segment of society.

On the contrary, the state pension plans such as the SERPS (State-Earnings-Related Pension Schemes),
have not been up to the expectations of the employees due to obvious reasons such as lack of detailed
individual assessment of each employee (income group) and constant dependence on low-cost policy
shifts for cost-cutting, one example being the conversion of DB (defined benefits) program to DC
(defined contributions) which means the pensions will directly be related to individual’s earnings rather
than a defined amount for each income group he/she falls into.

Categorization of Private Pensions

There are two basic types of private pensions in the UK, i.e.

1. Occupational Pensions
2. Personal Pensions

Occupational Pension Scheme

 Occupational Pension is an agreement between the employer (acting as the plan sponsor) and the
employee in accordance with the pre-existing professional relationship between them. The plan is under
supervision of the sponsor himself or an independent pension fund resorted to by the employer.
Occupational pension plans can be either mandatory for the employers by law or on the other hand,
voluntarily established by them. In the latter case, the employee resorts to independent private pension
institutions.

• Mandatory Occupational Pension Scheme

In mandatory system, the employer is legally obliged to provide a pension plan to his employees.
He has to arrange adequate schemes and also, in case, contribute himself. The condition where
the scheme is optional for the employee to accept is also termed as mandatory.

• Voluntary Occupational Pension Scheme

In case of voluntary style of pension systems, the employer has the choice whether or not to offer
a pension scheme to his employees. The plan is usually offered by the employer to replace the
benefits of the social security system. The system where employer voluntarily offers the pension
plan but, the employees are legally obliged to join the plan, is also termed the voluntary
occupational pension plan.

Personal Pension Plans

When the employer is not related to the employees’ pension in any way, a financial institution
known as the pension fund establishes an agreement with the employees. In the arrangement, the
employee purchases a plan in by making contributions to the fund periodically (usually as annuities). The
plan limits the employee from using their funds during his job or even if he’s unemployed for a certain
term of investments and after retirement, the pension funds return the pension.
 The advantage of personal pension plans is the increased participation of the employee himself in
his contributions and the time period of investments. But, the long-term savings are inaccessible until
retirement

The choice of personal pension scheme is viable usually if the pensioner is,

• Self-employed
• Offered personal pension plan by the employer himself
• Intending to invest added to the occupational pension plan
• Intending to not invest in occupational pension plan
• Intending to opt for the optional occupational pension plan
• Not employed and wants to save for future
• Setting up a pension scheme for someone else

There are two further types of personal pension schemes.

1. Group Personal Pension Scheme

2. Stakeholder Pension Scheme

• Group Personal Pension Scheme

Alongwith the regular personal pension schemes, there is also a ‘Group Personal Pension Plan’
(GPP). The only difference is that in this scheme, the employer himself offers to provide a
pension fund rather than you choosing it yourself. He offers only in case there is no occupational
pension plan.
 • Stakeholder Pension Scheme
The difference between regular pension scheme and stakeholder pension scheme is that

there are stricter regulations involved in this type of pension scheme. Otherwise, the system of

pension arrangements is the same between the pensioner and the independent pension fund. The

employee has to make annual fund payments or annuities which will be accrued for an ending

retirement fund or pension.

In stakeholder pension, the scheme arranger must adhere to following rules in UK, the

scheme must

o Have a pre-defined contribution scheme

o Have a minimum contribution of 20 enabling all savers to save regularly.

o Have a basic investment scheme/package if employees don’t want to choose the

investment scheme

o Employ trust managers to protect individual employees’ needs

o Allow savers to transfer existing pension funds into the scheme

o Not charge them for transferring the pension fund to this stakeholder pension scheme

o Not charge more than 1.5% of total pension fund each year

o Employ an accountant for the verification of the scheme

Limitations or Delimitations

There is virtually no limit to the amount of contribution an employee can make to the pension schemes.

He can choose to go for various private pension schemes separately, have a state pension account

simultaneously. Moreover, there are tax incentives as well for the pension savings but, to a certain limit.

After crossing the limit, the pension will be subject to taxation.

\

References

• Craig, Lee. "Public Sector Pensions in the United States". EH.Net Encyclopedia, edited
by Robert Whaples. March 16, 2003.
URLhttp://eh.net/encyclopedia/article/craig.pensions.public.us

• (2005) Private Pensions, OECD classification and glossary, OECD

• Banks, J. & Blussel, R. (2005), Private Pension Arrangements and Retirement in Britain Institute
for Fiscal Studies, University College London, England

• www.monetos.co.uk

• Crawford, R., Emmerson, C. & Tetlow J. Occupational pension value in the public and private
sectors Institute for Fiscal Studies\, University College London, England

Appendix