Listen to a Business English Dialogue About Defined benefit pension plan
Vanessa: Hi Ella, have you heard about defined benefit pension plans in business and finance?
Ella: No, what are they?
Vanessa: Defined benefit pension plans are retirement plans where employers promise to pay retirees a specific, pre-determined benefit for life, based on factors such as salary history and years of service.
Ella: Oh, I see. So, it’s like a guaranteed retirement income provided by the employer?
Vanessa: Exactly. Defined benefit pension plans are designed to provide retirees with a secure source of income during their retirement years.
Ella: Are defined benefit pension plans common in today’s workforce?
Vanessa: They used to be more common, but in recent years, many companies have shifted towards defined contribution plans like 401(k)s, which place more responsibility on employees to save for retirement.
Ella: That’s interesting. What are some advantages of defined benefit pension plans?
Vanessa: One advantage is that retirees receive a guaranteed income for life, regardless of market fluctuations or investment performance.
Ella: What about disadvantages?
Vanessa: Well, one downside is that employees have less control over their investments compared to defined contribution plans, and some companies may struggle to fund their pension obligations.
Ella: Thanks for explaining, Vanessa. Defined benefit pension plans sound like a reliable option for retirement income.
Vanessa: No problem, Ella. They can provide retirees with financial security and peace of mind during their retirement years.