c




pension fund
‡ A fund reserved to pay workers' pensions when
they retire from service.
‡ A financial institution that collects regular
contributions from employers to provide
retirement income for employees

pension Plans

A pension Plan (pp) is a arrangement to

provide income to participants in the plan when
they retire. PPs are generally sponsored by private
employers, government as an employer, and labour
unions.
mlassification of Pension plans
6he financial intermediary, or an organization, or an
institution, or a trust manages the assets and pays the
benefits to the old and retirees.
Some pension plan are said to be insured.
In such case sponsor pays premiums to a life insurance
company in exchange for a group annuity that would pay
retirement benefit to the participants.
a) Defined Benefits Pension Plan.
under this final pension is pre defined based on the
final salary and the period of service. PPs Offered by
public sector enterprises. 6his type ensures
predictable amount of pension to the employees for
the year after their retirement and guaranteed by the
state.
h Defined montrihution Pension Plan
Popular in US, do not guarantee the amount of final
benefit which the employees would get after they retire.
6he employee and employer make a predetermined
contribution each year, and this fund are invested over
the period of time till the retirement of employee. What
ever the value of these investment at the time of
retirement, the employee will get a certain amount.
c Pay-As-You-Go Pension Plan.
In Most european countries, including France and
Germany, pension are paid through PAYGPP, under
which the current employees pay a percentage of their
income to provide for the old, and, this, along with the
contribution of the state,
[anagement of Pension Fund

Some sponsors of pension plans manage their

pension funds themselves, but most of the sponsors
appoint a trustee to do so on their behalf. 6his trustee is
usually a trust department of a commercial bank, or an
insurance company, or a mutual fund. 6he trustee
manager invests contributions provided by the sponsor
and pays benefits to the retired persons.
m
 P m [

. Government mployees¶ pension chemes

Which has been made mandatory from 1995. It is a
sub set of employees¶ provident Fund. It Provides
a) Superannuation pension,
b) Retirement pension,
c) Permanent total disability pension,
d) Widow or widower¶s pension, and
e) Orphan pension.
It is essentially a defined-contribution-defined-benefit
pay-as-you-go scheme.
— Privately Administered uperannuation Fund
Êmployer Can have a superannuation scheme with the
LIC and Pay suitable contribution for the employees in
service. Suitable Annuities or pension plan have to be
purchased from the LIC.
Lm pension plan cheme

Varistha Pension Bima Yojana (VPBY .

government subsidized scheme meant to benefit
Indian citizens aged 55 and above,
Single premium Rs 33,335 Monthly Pension Rs 200
Rs 2,77,490 Rs 2,500