KMJ

Pension Scheme

Kannur Muslim Juma-ath started a pension scheme 21 years ago, to provide relief to the poor, the sick, the aged and the widows. More than 300 peoples are benefited by this scheme. Two well-wishers from Kannur and and Qatar Kannur Muslim Juma-ath committee financially supports this great scheme.

A pension is a fixed sum to be paid regularly to a person, typically following retirement from service. There are many different types of pensions, including defined benefit plans, defined contribution plans, as well as several others. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.

The cash contribution and pension expense calculations are both often referred to as the cost of a pension plan - one as a cash outlay and the other as a reduction (or increase) in company earnings. Both are calculated using similar principles, although the rules for calculation are very different. Pension plan formulas are generally designed to tie the participants' benefits at retirement to their compensation and/or service with the employer. Each employer chooses how to reflect compensation and service based on their individual business needs and the needs of their workforce. Pensions are a form of deferred compensation. Participants trade compensation today for future pensions tomorrow. Both the pension funding rules and pension accounting rules require that the cost of that deferred compensation be recognized as it is earned. An actuary takes the plan's pension formula and determines how to reflect the cost of the plan over each participants working lifetime. There are three basic principles used: Active participants earn new benefits each year. Actuaries call that the normal cost. The normal cost is always reflected in the cash and accounting cost of the plan. Actuaries must consider the difference between the actuarial liabilities, which is the value of benefits already earned, and the assets.

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