A pension is a fund into which a sum of money is added during an employee’s employment years, and from which payments are drawn to support the person’s retirement from work in the form of periodic payments. A pension may be a “defined benefit plan” where a fixed sum is paid regularly to a person, or a “defined contribution plan” under which a fixed sum is invested and then becomes available at retirement age.

Individual Pension Plan

This is a retirement benefits scheme that allows individuals to save regularly to build up their retirement income. Whilst individuals look forward to retirement from formal employment, most of them are neither saving enough nor starting to save early enough to fund the lifestyle they desire in retirement.

Group Pension Scheme

The scheme is run by a pension provider that your employer chooses, but your pension is an individual contract between you and the provider. At the time of retirement, the overall benefit is determined by the total amount of contributions and the accrued interest earned on the contributions.

Provident Funds

A provident fund is a compulsory, government-managed retirement savings scheme.  Workers contribute a portion of their salaries into a provident fund and employers must contribute on behalf of their employees. The money in the fund is then paid out to retirees. In some cases, it’s paid out to the disabled who cannot work.

Annuity

An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.

Umbrella Scheme