A Company Pension Plan is ‘administered’ by a company for its employees.
Also known as an Executive Pension Plan, it can be ‘contributory’ or ‘non-contributory’.
A ‘contributory’ scheme is where the employee makes contributions to the Employer Pension Scheme on top of what the employer contributes. Obviously, this is more desirable as it will increase the sum available to the employee on retirement.
There are two key types of Schemes:
- Defined Contribution Schemes – This is where the pension you receive on retirement is based entirely on the contributions into the scheme over the years, as well as investment growth within the fund.
- Defined Benefit Schemes – You know in advance what pension you are going to receive when you retire and the company must plan the contributions to meet this ‘defined benefit’. This type of scheme is becoming less popular because it places a large burden on employers.
