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Companies seem to be giving employees more and more control over their retirement. Pension plans are...

Companies seem to be giving employees more and more control over their retirement. Pension plans are rare in the private sector, and employees are left to their own devices when it comes to investing for retirement. What are the risks, benefits and accounting implications of these practices?

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                Background- There are two sectors, Government sector and Private sector. Employees work in government sector, we can say Govt job, they get less salary then Private sector job. Because of Govt job gives more retirement benefit to their employees than Private job. For a long time it is better to be in Govt job, however on retirement employees get money and can spend his remaining life.
             While private job gives more attractive salary then Govt job for short term. It means employees get paid till they work with private companies. They have less retirment plans compare to Govt jobs.
Now we can discuss the risks associated with private sector in respective of pension plans-
Most of the employees work for money for their living and spend in short time on their necessity. At the time of their retirement, they should have money for their old age. A few, people plan their retirement so they would have sufficient fund for living.
In private sector, employees have to plan for their retirement which also is risk as they are not much qualified to plan and make strategy to invest to grow their net worth.
Risks to companies are- They can miss the talent of people who prefer the Govt job due to higher pension plans.
Now comes to benefit- Employees are working in private sector and if they have the capability to invest their money wisely and as per their choice. Which helps them to get higher sum at the time of retirement. In this digital era, they can get services from private companies as professional help and invest for higher return. Employees get the higher salary direct in their hand since no deduction for pension plan.
Benefits to companies- They can save the cost of maintaining for pension plan. They just pay full amount and get free.
Accounting implication of these less pension plan practice- Companies do not have to record for pension plans and maintain books of account in respect to pension plan. Companies do not have to deposit employees' and employers' contribution to pension fund on or before a specific date. Private sector companies has to deposit salary direct into employees bank account.

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ekkarill92 answered 1 year ago
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