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Comment by lotsofpulp | Hacker News Reader

In the US, "pension" typically means a defined benefit pension.

Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1]

[1] https://money.cnn.com/retirement/guide/pensions_basics.money...

I mean that in common vernacular, when someone says "pension", they are referring to a defined benefit pension. Otherwise, in the US, we use 401k, IRA, "retirement funds", or other words.

And a 401k and IRAs is are very poor "pension" plan compared two other countries.

I'm not sure what you're claiming. It's possible to design a very lucrative and costly defined benefit pension, but in the US, no employer is offering it other than governments, and even the governments are beginning to croak under the stress of unsustainable benefits, so new employees are not eligible for them.

I was comparing the US DC (401k) vs say the UK (A Group Personal Pension or a SIPP).

Based on some quick Googling, I don't see what is so much better about an SIPP or a group personal pension plan? SIPP offers some kind of matching from the government, but it doesn't seem significant.

I don't know anything about the 401k system, but the money going into my pension is from my gross salary. Combined with high taxation, it means that it's worth up to twice as much going into my pension as it would be going into my bank account.

SIPPs are beyond my lifestyle.

It's the same in the US.

Main one is Tax relief at your highest rate on income tax you get an extra 20% into your pension - if your a higher rate tax payer you can reclaim the extra tax relief.

For a higher rate taxpayer you put in £60 and get £100 in your pension.

You can also do salary sacrifice and reduce you income tax and NI lability

Unless your retirement tax rate will be lower than your working years rax rate, it comes out in the wash eventually.

It's quite likely that some people today will end up paying higher income tax rates in retirement than today.

Id like to see that worked out in detail have you got an example? unless you mean you bust the lifetime limit, which is just bad planning.

And you can use drawdown to manage your income from the pension and you would of course make use of income from your ISA.

I don't think I've ever heard someone refer to their 401k as a pension

I think they use the word "pension" for defined contribution retirement plans in the UK since they, of course, don't have the US tax code section 401k.

All that tells me is that there are no more pensions, not that the definition has changed. Employers are contributing money now, but have pushed any risk onto the employee, making it feel pretty worthless as a retirement strategy.

> Employers are contributing money now, but have pushed any risk onto the employee, making it feel pretty worthless as a retirement strategy.

You seem to be arguing that saving for retirement is futile. You can invest is (almost) arbitrarily low risk to principal investments like US treasuries. I probably wouldn't advise that as the sole investment strategy for most people. But it is one way to reduce certain types of risk. (And most defined benefit plans have the same risk with respect to inflation.)

I think all they're arguing is that the word pension =~= "defined benefit retirement plan".

Earnest question from a non-American - aren't companies legally bound to pay these benefits?

It's always surprising to me to see those huge companies stopping payments and the story ending there

Legally bound doesn't mean much if it doesn't have the power to print money. If it affects enough voters, the government usually steps in with a bailout for part of the benefit.

In the past, this was generally true, but not anymore. Case in point, my great uncle - yes, that's a thing in genealogy, look it up - was fortunate enough to retire with one in the late 80's/early 90's.

You don't even have to know much about the system to understand how this works.

Defined benefit - Your pension is X, determined by rank, years of service, etc.

Defined contribution - While the above conditions may still apply, the bottom line of how well you do is determined by how much you put in on a regular basis.

Not hard to imagine why most companies made the switch or simply stopped offering traditional pensions - they're really expensive over the long term.

I think the point is about vocabulary more than anything. Most people (in the US) understand the word "pension" to specifically refer to a defined benefit plan.

I never heard anyone in the US in my 30 years there use the term "pension" to refer to the typical retirement plans available in the US.

In UK and Ireland, though, most retirement plans are called "pensions", even defined contribution.

The first time I told my mom about pensions after moving, she said "oh my god you get a PENSION?!??" like it referred to the paycheck for life her parents got from the paper mill.

It's just semantics.

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