Glossary
Defined Contribution vs. Defined Benefit
Defined Contribution and Defined Benefit are the two actuarial models of occupational pension provision. Under Defined Contribution the benefit results from the sum of savings contributions paid in plus interest. Under Defined Benefit the pension is set as a fixed percentage of the insured salary. Defined Contribution predominates today.
At a glance
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Defined Contribution: the retirement benefit corresponds to the accumulated savings (contributions plus interest).
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Defined Benefit: the pension is set as a percentage of the insured salary, independently of the accumulated capital.
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Most Swiss Pension Funds are today organised on the Defined Contribution basis.
Frequently asked questions
Under Defined Contribution the retirement benefit depends directly on the accumulated savings, meaning contributions and interest. Under Defined Benefit the pension is fixed in advance as a share of the insured salary. Defined Benefit is more predictable for the insured but riskier for the fund, which is why it has become rare.
Part of the topic
Vorsorge & Pensionierung
