Defined benefit scheme

Definition: defined benefit scheme

This is when the benefit payments are defined and fixed in advance.

It means that if the pension fund experiences a poor performance the recipient is guaranteed a certain income. This means that the employee or government bears the brunt of any under-performance in the pension investment fund. However, it also means the recipient is unlikely to benefit from an above expectation performance; it just offers greater security.


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By on November 28th, 2012