Numbers of private pension plans products in EEA by type – occupational or personal, DB or DC

Personal pensions (‘third pillar’)
Personal pensions are private voluntary plans in which contributions are invested in an individual account managed by a pension fund or financial institution. They are usually defined contribution plans, where the level of assets determines the level of pension benefits provided. To encourage savings, MS often provide tax incentives or additional contributions.
Occupational pensions (‘second pillar’)
Occupational pensions are private supplementary plans linked to an employ-ment relationship. Contributions are made by employers or employees, or both, based on earnings. These plans may be mandated by national legislation but more commonly are established either in employment contracts or in sector- or profession-based collective agreements negotiated by social partners. Pension liabilities may be assumed directly by the sponsoring company (as book reserves), or contributions may be invested in private funds or insurance contracts. Funding may be based on defined benefit or defined contribution principles (the latter are increasingly common). Particularly in MS where public pensions only provide a minimal level of support, occupational pensions allow many employees to even out consumption over a lifetime and to enjoy in retirement a standard of living close to that which they had during working life.
Defined benefit (DB): Level of pension payments are usually defined by a formula based on earnings, the length of employment and/or similar factors (e.g. minimum 35 years’ service; earnings during 10 best years).
Defined contribution (DC): Level of pension payments are based on the total contributions to an individual account, adjusted for investment returns and costs.