Accrual
Accrual
Pension accrual refers to the accumulation of benefits in a pension plan over time. This can occur through regular contributions made by an individual or their employer, as well as through any investment returns earned on those contributions.
In a defined benefit pension plan, the benefits are typically based on a predetermined formula that takes into account factors such as an individual’s salary and years of service. In this type of plan, the benefits accrue over time as the individual works and makes contributions to the plan.
In a defined contribution pension plan, the benefits are based on the contributions made to the plan and the investment returns earned on those contributions. In this type of plan, the benefits accrue as the contributions are made and the investment returns are earned.
It’s important for individuals to understand how their pension plan works and how their benefits are accruing in order to make informed decisions about their retirement savings.
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