Pensions

Question 1

What are pensions

Answer 1

Savings set aside from money earned over working life for living expenses once retired

Controlled by tax due to tax breaks available

Important source of income in FS industry in international centres

Question 2

Types of tax

Answer 2

State pension

Gov provides sum throughout life of individual ( low return)

Question 3

Types

Answer 3

DBP

Defined benefit pension

Employer commits to give employee fixed pension amount / guarantee amount

Contactual obligation

Depends on salary, length of time worked, position

• less likely due to large costs

Question 4

Types

Answer 4

DCP

Defined contribution pension

Pension plan where external investors invest contributable amounts into scheme to increase pension pocket

Amount received at retirement depends on how much invested and return made on investments

Personal pension contract / liability remains with investor

Question 5

What should employee consider choosing type of scheme

Answer 5

Level of employment contribution

Stability of employment

Financial security of scheme

Nature of benefits

Assessment of investment prospects

Early retirement provisions

Question 6

Why’s it important to invest in pension

Answer 6

Out savings aside from money earned over working life to pay for living expenses once retired

Hope money adequate to support lifestyle

Personal pensions important as relieve government of commitment to provide for pensioners in later years

Question 7

Role of OECD

Answer 7

Organisation for economic Co-operation and development

Called gov to reform private pensions in light of falling values on stock markets

Report ‘private pension outlook’ calls for governance and regulation to improve and fund management more transparent

Immediate challenge to prevent old age poverty from rising