What are defined-benefit and defined-contribution plans?
A defined-benefit pension plan is one in which the levels of benefit (pension, death benefit etc) are defined in advance. Usually this type of plan is not available on an individual basis, but only through company pension schemes, since variations in investment performance make it impossible to predict the behaviour of a fund in advance. A defined-contribution plan is the normal choice for individual pension’s investment – contributions are pre-set, but the eventual result will depend on the behaviour of the underlying investments.
