Defined-Benefit Scheme
This is the classic pension scheme, also known as a salary-related scheme, that guarantees workers a set benefit upon retirement, regardless of the performance of the underlying investment pool. Traditionally, the employer agrees to provide a set monthly income after retirement, based on the employee's age, length of service, position and final salary at retirement. Bankruptcy of the employer is one of the few variables that may affect this situation. Many companies in the U.K. have been phasing out salary-related schemes and replacing them with more flexible schemes, typically defined contribution plans such as money purchase schemes. Although defined-benefit schemes have been the norm in India, many companies are moving away from such schemes and towards defined-contribution schemes.
