What is defined contribution retirement plan and how it works
ET CONTRIBUTORS|
Mar 12, 2018, 06.30 AM IST
1. In a Defined Contribution (DC) retirement plan, the pension amount or value of retirement benefit is not known beforehand.
2. The value of retirement corpus depends on both the value of contributions made and returns generated through their investment.
3. A defined amount is contributed by the employee, the employer or both, over a period, and is invested. The final corpus determines the retirement benefit.
4. Decisions about allocation of funds to various options like equity or debt, and periodic reallocation of funds, is usually taken by the contributing individual or party.
5. New pension products and Provident Funds are examples of DC Retirement Plans.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
2. The value of retirement corpus depends on both the value of contributions made and returns generated through their investment.
3. A defined amount is contributed by the employee, the employer or both, over a period, and is invested. The final corpus determines the retirement benefit.
4. Decisions about allocation of funds to various options like equity or debt, and periodic reallocation of funds, is usually taken by the contributing individual or party.
5. New pension products and Provident Funds are examples of DC Retirement Plans.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
