Defined Benefit Pensions

A Defined Benefit Pension is a retirement plan where an employer promises to pay employees a specific, pre-determined benefit upon retirement, usually based on salary and years of service. The employer bears the investment risk and manages the fund to ensure there’s enough money to fulfill these promises. Employees typically don’t contribute much or at all, and the benefit amount is calculated by formulas related to their earnings and tenure. These plans offer predictable income after retirement, providing financial security, but are becoming less common as companies shift towards alternative retirement arrangements.