Pension Pillar

AAA

DEFINITION of 'Pension Pillar'

One of three pension formats as outlined by the World Bank in 1998 and which has since been adopted by many economically reforming countries in Central and Eastern Europe. The goal of the three-pillar system is to separate the major objectives of pension (retirement) plans into the following pillars:

Pillar 1 – A standardized, state-run pension system, which offers basic coverage and is primarily focused on reducing poverty.
Pillar 2 – A funded system that recipients and employers pay into; this includes pension funds and defined-contribution accounts/plans.
Pillar 3 – Voluntary private funded accounts, including individual savings plans, insurance, etc.

INVESTOPEDIA EXPLAINS 'Pension Pillar'

The three-pillar system outlined here very closely resembles what we see in the United States:

Pillar 1 – Social Security provides basic but universal coverage.
Pillar 2 – Comprised of 401(k)s and other employer plans
Pillar 3 – Personal savings and investment plans

This multi-tiered system is seen as more effective than having one state-run pension system to serve all citizens.

RELATED TERMS
  1. Old-Age And Survivors Insurance ...

    An account within the Social Security Trust Fund used to pay ...
  2. Social Security Trust Fund

    An account used by the United States federal government to record ...
  3. Medicare Hold Harmless Provision

    A legal statement prohibiting an increase to Medicare B premiums ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
Related Articles
  1. 10 Common Questions About Social Security
    Retirement

    10 Common Questions About Social Security

  2. What Is The World Bank?
    Insurance

    What Is The World Bank?

  3. Introduction To Social Security
    Retirement

    Introduction To Social Security

  4. Choosing The Best Disability Insurance ...
    Options & Futures

    Choosing The Best Disability Insurance ...

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center