A pension is an amount that the State pays to retirees, disabled people and other people.
Pension is a concept that comes from the Latin word pensĭo and has several uses. This may be an amount that the State pays to a person when they retire, become widowed, or become disabled. Said money is delivered periodically, either over a period of time or permanently. For example: "We'd better go to dinner next week, when the pension has already been collected" , "The government could have problems paying the pensions starting in April" , "Juana has not yet processed the pension for José's death" .
Pensions, in this sense, are part of what is known as social security , which seeks to guarantee that all people can satisfy their basic needs. The criteria for payment of the pension depend on the legislation of each nation, as does the amount to be received.
Contributory pensions
Depending on its characteristics, a pension can be contributory or non-contributory. Contributory pensions are those that, in one way or another, the person who receives them has already paid at another time (that is, has contributed to its establishment). That is the case of retirement , whose funds are created from the contributions of active workers.
Specifically, we would have to explain that within these contributory pensions there are basically three types:
- Pension or unemployment insurance . As its name indicates, it is that which the State grants to a citizen who is currently unemployed (unemployed) and who, when he was working, contributed and contributed a relevant amount to maintain social security and the rest of public services. .
- Retirement pension . This other modality is granted to people who, having reached their maximum working age according to the law, decide to put an end to their working life.
- Pension or disability or disability insurance . Various types of pensions are established within this category, which is granted to a person who has been working and who, due to an accident or illness at work, for example, cannot continue carrying out his or her professional work in the same way due to the aftermath.
Non-contributory contributions
Non-contributory pensions , on the other hand, constitute a right that arises directly by law (like alimony ).
On the other hand, it should also be noted that these non-contributory pensions include various modalities, among which the following stand out:
- Alimony , which is what a person must pay to another because it is their child or as a result of having maintained a marital relationship so that they can survive.
- Widow's or widow's pension , which is given to the widow or widower of a person who has died due to illness or accident.
- Orphan's pension . As its name indicates, it is the one granted to the children of a deceased person, mainly during the time they are minors.
A pension can provide a fixed income as a social security benefit.
pension funds
Pension funds are financial instruments that can be used to support the pension system. What a fund manager of this type does is make an investment whose benefits allow the flows generated by the pension plan to be met.
Specifically, pension funds are investment funds that receive the monthly contribution of those who have pension plans. That money is invested in different products (such as bonds, stocks, etc.) to generate a return.
At this point it should be mentioned that a pension plan requires a periodic contribution from the beneficiary with the expectation of obtaining extra income in the future. The pension fund, meanwhile, is the instrument that makes it possible to invest the contribution or savings in other financial products.
Suppose that, when contracting a pension plan, Carlos contributes $80 per month. This money can be incorporated into a pension fund that is responsible for its administration to invest it and produce profitability.
Retirement systems
It is important to consider that, as with pensions, there are different retirement systems . Each one seeks, in its own way, to guarantee the economic security and social protection of the individual once he or she reaches retirement age and the time for retirement arrives.
The pay-as-you-go regime , in this framework, is based on the contributions of workers (through a percentage of their salary ) and companies to finance retirements. This system can be complemented with money provided by the national State and that comes from taxes. Retirement funds, in this way, are managed and distributed by the authorities in charge of state management.
The capitalization regime , on the other hand, implies that the worker allocates his savings to an individual retirement account managed by a private administrator. This manager makes investments to generate interest.
It should be noted that, from the State, a labor reform is sometimes proposed to modify the collection of funds that are destined to pay pensions, either by changing the retirement age or the percentage of contributions. The minimum retirement can also be updated to address inflation.
People, on the other hand, can do retirement planning beyond the current system. A self-employed worker, to mention one case, can manage his personal finances and address his wealth management in pursuit of having a guaranteed income when he reaches old age.
A pension can be a hotel establishment.
The pension as a hotel establishment
On the other hand, certain establishments that accommodate guests and the food services offered by hotels are known as pensions.
"When I was 15, I left my parents' house and went to live in a boarding house" and "I made a reservation in a hotel with full board" are phrases that show this usage.