In: Accounting
1.What is the difference between a Private Purpose fund and a Permanent fund?
2. What are the major differences between the 2 types of pension plans?
short answer please
Answer-1-
Private Purpose Fund | Permanent Funds |
1-The purpose of a private purpose trust fund is to generate income to benefit individuals, private organizations or other governments. | Whereas the purpose of a permanent fund is to provide income to benefit the government and its citizens. |
2-Private purpose funds are accounted for on the accrual basis & the economic resource measurement focus. | Whereas permanent funds are accounted using for using the modified accrual basis & the current financial resources management focus. |
2-
Defined benefit plan |
Defined contribution plan |
A Defined Benefit pension plan promises to pay you a certain amount of retirement income for life. | With a Defined Contribution plan, contributions are guaranteed, but retirement income is not. |
Your employer is responsible for investing the contributions to ensure there’s enough money to pay the future pensions for all plan members. | You are responsible for investing all contributions to grow your savings. In this way, the plan is similar to an RRSP. |