Definition of defined-contribution pension plan

Pension plan for which contributions are specified (mandatory or voluntary depending on the scheme), but the amount received by the employee on retirement is not fixed. Instead, it relates to how the funds in the plan have been invested and the return on that investment. The employee normally has the responsibility of deciding how the contributions are invested (though investment choices may be limited by the actual pension fund provider). Companies like them better than defined-benefit pension plans because the pension outlay is gradual and controlled and liability for investment performance is passed onto the employee.

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