Question

Pakistan State Oil - the leading oil marketing company of Pakistan, operated approved funded defined benefit pension schemes separately for permanent management and non-management employees since its inception in 1976.
Recently, the Company has launched a Defined Contribution Scheme in year 2019 for its employees. This scheme allows early vesting of retirement benefits to the employees so that their accumulated pension benefit would be available on cessation of service at any time instead of waiting for superannuation/retirement age.

In view of the aforementioned, come up with at least three reasons for PSO to switch from DB to DC Scheme. Shall it going to benefit the company? Your answer should be in detail with solid justifications and arguments.

Answer 1

The reasons for PSO to switch from DB to DC Scheme are:

• It has gold standard for pensions.
• They are more secure.
• More generous than DC pensions and pay an income that increases along with inflation.

What are the reasons for a shift?

The movement from defined benefit (DB) to defined contribution (DC) pension plans is known to be one that has made workers to decide or make choices that may affect their financial resources in terms of retirement.

Therefore,   DC Scheme is more of a benefit to the employees that the company as it tends to lower an employee's taxable income.

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