Greece Defined Benefit v Contribn Pensions


V

vjp2.at

It was my heresay understanding that before Andreas Papandreou, Greek
pensions were defined contribution, and became defined benefit afterwards.
Is anyone able to provide more definitive information? In the USA, SOcial
Security is defined benefit (inflation adjusted), which is precisely why it
is insolvent. Many USA corporations have been trying to move their pensions
from defined benefit to defined contribution. This would explain the short
retirements of some professions. Here in the USA it is not so strange for
defined contribution pensions to be vested after ten or fifteen years,
especially as people rarely stay with the same profession or employer their
entire life.

- = -
Vasos Panagiotopoulos, Columbia'81+, Reagan, Mozart, Pindus, BioStrategist
http://www.panix.com/~vjp2/vasos.htm http://www.facebook.com/vasjpan2
---{Nothing herein constitutes advice. Everything fully disclaimed.}---
[Homeland Security means private firearms not lazy obstructive guards]
[Urb sprawl confounds terror] [Phooey on GUI: Windows for subprime Bimbos]
 
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A

ADR

   It was my heresay understanding that before Andreas Papandreou, Greek
pensions were defined contribution, and became defined benefit afterwards..
Is anyone able to provide more definitive information?
What is a defined contribution pension plan?

And you are wrong about the Greek pension plans.
In the USA, SOcial
Security is defined benefit (inflation adjusted), which is precisely why it
is insolvent. Many USA corporations have been trying to move their pensions
from defined benefit to defined contribution.  
Social Security is not insolvent and it is not going to be anytime
soon.
 
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D

David Woolley

This was posted to uk.finance. Except that the UK situation, for
private pensions, seems similar to that in the US, what is the relevance
to the UK?
What is a defined contribution pension plan?
It's sometimes called "money purchase". It is where you pay a set
amount, which is then invested. When you retire, the investment is used
to buy an annuity. The pension depends on how successful the investment
was, and the annuity rates at retirement.

They remove the risk from the employer, but make the unreasonable
assumption that all the employees are experts in financial management,
particularly the younger ones.

With defined benefit, the cost to the employer is not raised by frequent
job moves. In fact, it is generally reduced, as the pension is frozen
at the move. Even if there is inflation linking, in the long term,
investment should outperform inflation. In the UK, they also tended to
be final salary based, but based on the salary at the time that the job
changed, so there was a further disadvantage to the employee if they
moved jobs before they reached their best paid position.

So, job changers subsidised those who stayed for life. This also
encourages ageism, as the real cost of employing an older worker is
higher, because you have less time for the pension fund investment to grow.

Social service provided pensions tend to cover those who are not
financial experts and those whose financial planning has gone wrong, so
needs to be closer to defined benefits. (The UK state pension is
actually quite complex, and, in principle only really applies to people
who either also have a private pension, or have no recourse to "state
funds". That's because there is a means tested benefit that raises
retirement income to greater than the state pension for most or all
people. Being means tested, many who are entitled to it do not claim
it, and those with adequate private pensions do not benefit.)
 

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