Workplace pension scheme

A **pension** is a retirement plan designed to provide individuals with income after they cease working. It operates as a fund into which contributions are made, typically during a person's employment, with the goal of generating periodic payments throughout their retirement. These payments are intended to support the individual's living expenses and maintain a reasonable standard of living. Pensions are commonly established and managed by employers, insurance companies, government entities, or other organizations like labor unions, offering a form of deferred compensation with potential tax advantages for both employees and employers.

There are primarily two main types of pension plans: defined benefit and defined contribution plans. In a **defined benefit plan**, the retirement payments are predetermined based on factors like years of service and salary history. The contributions to the pension fund are adjusted to ensure these defined payments can be sustained. Conversely, a **defined contribution plan** involves fixed contributions made during the working life, and the retirement payments depend on the accumulated value of the fund, influenced by investment performance. Pensions often include insurance aspects, providing benefits to survivors or disabled beneficiaries, and are distinct from severance pay, which is a one-time payment upon termination of employment.

The terms used to describe pensions can vary across countries. In the United States, they are often referred to as "retirement plans," while in the United Kingdom and Ireland, they are commonly known as "pension schemes." In Australia and New Zealand, the term "superannuation plans" or simply "super" is used. Regardless of the specific terminology, the underlying principle remains the same: to provide a structured and reliable source of income for individuals after they retire from the workforce. A recipient of a retirement pension is known as a pensioner or retiree.