Defined-Benefit and Defined-Contribution Plans
A defined-contribution fund is a pension fund that provides benefits that are determined by the returns on invested assets that are often based on the regular contribution of a salary of fixed proportion. On the other hand, a defined-benefit fund is one that offers benefits that are determined by a formula that was previously fixed and whose basis usually relies on the years of service or the final or average salary. The economic effects brought about by the developments of pension funds rely on the types of fund and on both types of fund dominating only in particular areas. While the type of fund also influences the significance of major regulatory issues, this chapter attempts to look into and further investigate some of the fundamental economic issues regarding the choice of type of fund particularly in terms of capital markets, labour economics, agency, insurance, information, and corporate finance.
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