Allocated Funding Instrument

AAA

DEFINITION of 'Allocated Funding Instrument'

A specific type of insurance or annuity contract that pension plans use to purchase retirement benefits incrementally. The allocated funding instrument is funded with employer contributions that are paid into the plan. The benefits that are purchased by the funding instrument are guaranteed to employees at retirement.

INVESTOPEDIA EXPLAINS 'Allocated Funding Instrument'

Pension plans that do not use allocated funding instruments use unallocated instruments instead. In these plans, there are no employer contributions available to purchase benefits before retirement. This means that no benefits are paid for at the time that the premium payments are actually made.

RELATED TERMS
  1. Evergreen Funding

    1. A British term that describes a revolving credit arrangement ...
  2. Funding Gap

    The amount of money needed to fund the ongoing operations or ...
  3. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
  4. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  5. Commercial Package Policy (CPP)

    An insurance policy that combines coverage for multiple perils, ...
  6. Buffer Layer

    The difference between the primary limit of insurance and any ...
RELATED FAQS
  1. What are the sources of funding available for companies?

    Despite all the differences among companies, there are only a few sources of funds available to all firms. 1. They make profit ...
  2. What is evergreen funding?

    Evergreen funding is a term used to describe the incremental addition of money into a business. Before a business is started ...
  3. What's the difference between pre-money and post-money?

    The short answer to the question is that they differ in timing of valuation. Both pre-money and post-money are valuation ...
Related Articles
  1. Fundamental Analysis

    Cashing In On The Venture Capital Cycle

    Find out how VC firms make the market go round, and round and round.
  2. Personal Finance

    Seek An Adventure In Venture Capital

    Make a career out of chasing down the "next big thing".
  3. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  4. Professionals

    Why Auto-Enrollment Will Save Your Retirement

    Savers need all the help they can get, even if it amounts to an offer they can't refuse. That's why the biggest improvement to 401(k)s is auto-enrollment.
  5. Professionals

    Retirement Planning Essentials for Your Clients

    You may have heard these retirement planning tips before, but has your client actually put them into action yet?
  6. Professionals

    Which Robo-Advisor is Right for You?

    Which robo-advisor is right for you? There are many factors to consider, including breadth of services, ease of use and cost.
  7. Investing Basics

    This Investment Strategy Could Be Your key To Success

    Goal-based investing seems like an obvious tactic. But many investors have only a vague idea what their goals are, much less how to achieve them.
  8. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  9. Entrepreneurship

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.
  10. Professionals

    Is This the Best Advice You Can Give Your Clients?

    For all the specialized advice you could give your financial advisory clients, this one, simple tip beats them all.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center