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A pension is deferred compensation earned through employee service, providing monetary benefits after retirement. The main types of pension arrangements are defined contribution plans and defined benefit plans. In a defined contribution plan, the employer contributes a sum to the employee’s retirement account based on factors like age, service years, and compensation, without guaranteeing future payouts. The employee is responsible for investment decisions, facing all investment risks; if choices fail, the employee bears the consequences at retirement. In contrast, defined benefit plans provide guaranteed payouts based on a predetermined formula, shifting the investment risk to the employer.