Group Insurance 12 – Types of Registered Pension Plan

A form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the government. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires. Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan. In this article, we will discuss types of registered pension plan.
There are two types of registered pension plan.
1. Define contribution plan
Define contribution plan is the registered pension plan of the employee contributing by both employee himself or herself and employer base on a certain percentage of the employee income. The total amounts are invested by some pension funds on behalf of all employees in the company. When the employee retires, the large lump sum is annuitized or otherwise invested to provide a pension.
The pension provider will create illustrations based on various compound interest returns, but does not guarantee the outcome. The funds may be invested in fixed interest returns or a variety of securities, or any combination thereof. Most registered pension plan sold today are directed money purchase plans.

2. Define benefit plan
Most plans require at least for a 5% contribution by employer and employee. The pension provides for a formula as below
percentage of contribution x monthly income requirement x years of service = monthly retirement benefit.
If the employer’s contribution is not sufficient, the employer must make additional lump sum payments to create the necessary funds.
The defined benefit plan has two known factors and one unknown factor
a) Known factors
* Employee contribution
* The pension is known well before retirement.
b) Unknown factor
How much for the employer to fund such pension, because the return of investments are not guaranteed.
The formula used may provide for several variations, based on the amount of the pension
* Best five years of earnings.
* Best five years of earnings in the last ten years.
* Final average.
Pension parallels final year’s income
* Career average.
Employer contribution to employee registered pension plan depends on seniority of each employee resulting in less contributing for younger employees.
* Flat benefit plan.
negotiated by union on behalf of employee as a union member with employer.

http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://groupinsurance12.blogspot.com

http://groupinsurance11.blogspot.com

All rights reserved. Any reproducing of this article must have all the links intact.

Aegon Religare Pension Plan, Insurance / Life / Pensions Plans, Pension Plan / Save today for tomorrows price rise / Irfan khan as old man check out price of milk pack, petrol / Shocked to hear very high prices / Man in bus is shocked to hear minimum bus fare to be Rs 50 / Irfan Khan tells him that prices will rise after 20 years / Basic things will be out of reach after retirement / Call Aegon Religare to find out the right pension amount / Invest in Religare Pension Plan

Related posts:

1. Registered Pension Plan III – Why Necessary for Pension Plan to be Registered
2. Registered Pension Plan V – Regulations, Laws and Maxmium Pension Benefits
3. Do You Know What’s Going On With Your Pension Plan?
4. Pension Profile – pension plan database software directory Reviews
5. Types of Annuity & Life Insurance contracts
6. Which is the best Pension Plan for Senior Citizens run by Insurance companies?
7. 401k Retirement Plan – What You Know About It?
8. How safe is the money in your pension fund? What if the company goes bankrupt? Is there an FDIC-type agency?
9. Q&A: You belong to an unusual pension plan because your retirement payments will continue forever (and will go to y?
10. Canadian Pension Income Tax Splitting Services