Suppose that in a certain defined benefit pension plan, employees work for 40 years earning salaries that increase with inflation. The pension fund's income is invested in bonds that earn the inflation rate. They retire with an annuity equal to 70% of their final salary. This annuity also increases with inflation. The annuities are received for 10 years. Estimate the percentage of an employee's salary that must be contributed to the pension plan if it is to remain solvent. Assume that the initia

What’s the difference between a defined benefit and defined contribution pension plan?

Components of a Company’s Defined Pension Costs - CFA, FRM, and Actuarial Exams Study Notes