Pension Benefits Plan

A Defined Benefit ( DB) pension plan is a plan in which employees accrue pension rights during their time at a company and the company pays them a benefit upon retirement that is a function of the tenure of that employee at the company and of their earnings. 

In other words, a DB plan is a plan in which a set formula determines the retirement benefit rather than depending on investment returns. A type of defined benefit pension scheme is government benefits, such as Social Security in the United States.

Traditionally, established workplace benefit programmes have been operated by organisations that operate solely for that purpose, by large corporations, or by the government itself, for government employees. Visit Now Expat Finance Hub for more information.

The final salary scheme, in which the pension paid is proportional to the number of years working, compounded by the member's retirement salary, multiplied by a factor known as the accrual rate, is a typical type of a defined benefit plan.