Pensions - Topics

How do pensions actually work? Cliff vesting at five years means leaving at four years and eleven months pays nothing from the employer side Raising the contribution rate and raising the retirement age solve the same cost from opposite sides Converting the pension to a lump sum uses the plan's own rate which is rarely the annuity you could buy outside A subsidized early retirement factor inside a defined benefit plan can be worth more than a year of salary The second pension pillar is usually where the real money sits Reduced hours at prorated pay and what it does to pension contributions Pay-as-you-go financing means this year's contributions pay this year's retirees with no fund set aside A plan freeze stops accruals for new hires and sometimes for everyone already enrolled The PBGC guarantees the monthly benefit up to a statutory cap if a single-employer plan runs out of money A defined benefit formula multiplies final average salary by years of service and an accrual rate Withdrawing from a multiemployer plan can trigger a liability payment that a small contractor cannot survive Pension income is taxed when it is paid so deferral only helps if your rate is lower by then Benefit formulas that use career average earnings pay less than final salary ones for the same years of service A transfer value is priced on assumptions that favour the scheme rather than the member leaving it Defined benefit vs defined contribution moves the whole risk onto the employee Some state constitutions impose a mandatory retirement age on judges Should pensions count the years women spent caregiving? Japan keeps its mandatory retirement age at 60 while obliging employers to rehire until 65 Collective defined contribution pools longevity risk without promising anyone a fixed formula Annuitising the pot vs drawing it down: the break-even age nobody calculates The Age Discrimination in Employment Act bans a mandatory retirement age for most jobs France raised its retirement age from 62 to 64 with a phase-in by birth year Waiving the joint and survivor annuity requires a spouse's written consent in most private plans Longevity and return assumptions decide the contribution an employer must make each year In a defined contribution scheme the investment risk sits entirely with the member Public sector pensions still promise a formula while most private sector workers carry only a pot The old-age dependency ratio decides whether a given contribution rate can hold for another generation Annual benefit statements project an income on assumptions the member cannot change or challenge Sweden credits a notional return on contributions and then divides by cohort life expectancy at retirement Contribution credits for years spent caring for children exist in most systems but are claimed late or never Vesting requirements decide whether you leave with a benefit at all or only with your own contributions