Jason Hayward. *File photo
Jason Hayward. *File photo

Trade Unions believe that pension plans are one of an employee’s most important financial assets that they will acquire in their lives.

Pensions comprise a major component of a worker’s personal income after retirement from the labour force. 

In order for individuals to receive adequate compensation after leaving the labour force they must have good pension plans.

There are two major types of pension plans for employees, Defined Benefits (DB) plans and Defined Contribution (DC) plans.

Under a DB plan workers are provided a certain monthly benefit from their pension.

The amount of the benefit is determined according to a formula based on the worker’s salary, age and years of service.

Under a DC plan money is put aside by the employer, and usually the employee, into a retirement savings account.

The accumulated value of the contributions at retirement, plus earnings on those contributions, is used to calculate the amount of monthly pension income the employee will receive.

Trade Unions strongly support DB plans over DC plans. 

The advantages of DB plans include:

  • Guaranteed specified benefits upon retirement
  • Less risk — the risk is on the employer not the employee
  • Lower administration fees
  • Additional Benefits (inflation protection, disability benefits, survivor benefits, etc.)

The National Pension Scheme approves the administration of both DB and DC plans. 

If you have a preference for one over the other, be sure to ask about the type of pension plan being offered at your place of employment before you commence employment. 

In doing so, you will have the information that you need to help you to plan successfully for your ageing future.

Bro. Jason Hayward is 1st VP Bermuda Public Services Union and a member of Age Concern’s, Campaign for Successful Ageing. If you would like to comment on these articles or learn more about the campaign for Successful ageing, contact us on 238-7525 or info@ageconcern.bm.