Defined Benefit Pension Plans
In a DBPP this is promised upon retirement
In a DCPP, contributions are invested in these financial products to grow over time.
Mutual funds, stocks, bonds or other investment portfolios.
What proportion of DB plans were fully funded at the end of 2012?
1 in 20 (just shy of 5%)
What is the risk and disadvantage of a DCPP at the time of retirement?
Risk of Insufficient Funds
In a DBPP who manages your pension?
Your employer manages the pension fund, ensuring that the promised benefit is paid out when the time comes.
This is the first of the options retirees can use to convert their DCPP savings into a steady income stream.
An annuity
A combination approach of strategies actually increases DB plan-related risk. True or false?
False, a combination approach DECREASES risk further.
What plan would generally be better if the individual wants to know the exact amount they will be provided upon retirement?
A DBPP
What was the common formula given for a DBPP?
2% × Final Salary × Years of Service
The final retirement savings in a DCPP depend on these factors.
The total contributions and investment choice/performance
Name a de-risking strategy discussed in class
What is the disadvantage of a DBPP that relates to switching jobs?
Lack of portability.
The Canada Pension Plan Investment Board, which manages Canada’s largest DBP, oversees more than how many billions of dollars in assets?
$575 billion in assets
This is the type of withdrawal you can make from your DCPP if you need to access a large amount of savings at once, though it is taxable.
Lump-sum withdrawal
Does a target benefit plan increase or decrease risk for companies?
Decrease risk - offers more flexibility than DB plans
What are the four advantages of a DCPP listed?
Portability, flexibility, employer cost certainty, and potential for growth