What Is the Key Distinction Between a Defined Benefit Superannuation

question 7

Multiple Choice

What is the key distinction between a defined benefit superannuation plan and a defined contribution superannuation plan?

• A) A defined benefit plan accumulates funds through investments in real assets such as land and buildings whereas a defined contribution plan accumulates funds through investments in shares and other more liquid assets.
• B) A defined benefit plan is run by professional trustees who seek the support of investment advisors and consultants. A defined contribution plan is normally run by trustees appointed by the employer and focuses on simple formulas for investment.
• C) The assets of a defined benefit plan are the focus in determining the benefits that will be paid out to members, whereas for a defined contribution plan the benefits are measured through the liability to members.
• D) A defined benefit plan's accrued benefits are determined by reference to the provisions of the superannuation plan trust deed's payment formulas. A defined contribution plan's accrued benefits are determined as the difference between the assets and other liabilities of the fund.
• E) None of the given answers.

---

Definitions:

Inflation

The pace at which the overall cost of goods and services increases, causing the value of money to decrease.

Money Supply

The total volume of economic monetary assets, such as cash, coins, and the balances in checking and savings accounts, at a specific period.

Currency

The system of money in general use in a specific country, consisting of banknotes and coins, that is accepted as a medium of exchange.

Overdraft Privileges

A feature offered by banks allowing an account holder to withdraw more money than is currently available in their account, often for a fee.