The composite case examples are based on two Bermuda residents who do not have US citizenship, US tax liabilities associated with foreign pensions, exempt company employers or other multinational, multi jurisdictional issues that require complex planning analyses.They are the same age, sixty years old. They obtained the same type of jobs around the same time. They have both saved and planned and have just about the same salary. They’ve each got a lovely spouse, the requisite two children, a mortgage, and a home that scoffs up everyone’s monthly allowance in constant repairs. They are do-it-yourselfers, tinkering and puttering around every weekend, content in their perceived destiny. They have both paid in to Social Insurance, as well as contributing each and every week (along with their employer’s match) to a Bermuda pension plan.They both want to retire in the next year, and they are both counting on their pensions to take them down the peaceful path to their golden years.And that is where the similarity ends.These two gentlemen we will call them John Contribore, and George Benefine have different employers. Mr John works in the private sector of the Bermuda economy, while Mr. George, you guessed it, is a civil servant. These gentlemen have entirely different pension plans.One of these gentlemen may have distinct financial advantage over the other at retirement time. Who and Why? That is the $64,000 question then, is one pension better? Whose pension will last longer?To arrive at the financial crossroads of where these gentlemen will be situated once retired, we need to look at how these two plans are constructed.The Defined Contribution Plan.John Contribore, as his name implies, vested almost immediately, is enrolled in a defined contribution plan under the Bermuda National Pension Scheme legislation. He is expected to contribute a percentage (5%) of his salary each payday to his pension along with an equal matching amount from his employer as long as he is employed. No job, no pension building.His plan allows him to be in charge of his investment asset allocations. He can be super aggressive on the risk side, or an ultra conservative non-risk taker preferring to see a positive balance (no matter how small the incremental change) rather than watching his future fly up and down like beaming dragonflies at twilight. He shares his risk choices with the pension fund investment professionals who are mandated to manage according to those choices. His pension will grow over time from his continued contributions, and from the unrealised appreciation of the investments held within. He may also experience unrealised investment losses on the cumulative total, depending upon global investment market conditions.Within the mandated legislation, John contributes and has some control over the direction of his retirement funds. At retirement, John’s current salary is mostly irrelevant when reviewing his final pension distribution options. His fund is what it is. What matters is the amount of the fund, the portfolio value of the fund, the timing of his distributions, the payout structure choices, the balance sheet financial strength of his pension administrator insurance company, and his life expectancy. We will examine and compare those options against the defined benefit plan in part two of this article.The Defined Benefit Plan.Mr George is enrolled in the government defined benefit plan. He had to perform eight years of service before he was fully invested in the plan. He also is now required to contribute to the plan on his regular compensation basis, based on a different demand percentage though because the plan is underfunded (see various media articles by Larry Burchall and Sir John Swan and government financial reports).Mr George has no control over the investment mandate of the defined benefit plan fund, and may not even be timely aware of the asset allocations, the portfolio manager’s track record, or the market performance. In some respects, the performance record of the benefit plan is irrelevant for Mr George. At retirement, he will receive a certain calculated monthly benefit along with a choice of a lump-sum payment. His final distribution monthly annuity payment is not determined on any capital market investment value, but on the number of years (months) of service, and his average annual compensation for the last two or three years (this average may have changed somewhat recently). Lapses of time in his government employment will affect his ultimate annuity value, too.While Mr John’s uncertainty stems more from outside capital market forces, Mr George’s focus is on the capital strength and ability of government to meet the demands of its retiree’s annuity payments.Mr John worries obsessively about his pension investments. Will they hold their value in this volatile market environment? It has been so up and down lately, it would be just his luck that the day he decides to cash out, the Dow goes down 400 points. Health insurance cost is another worry. He decides then and there, he’d better shape up, in more ways than one, if his retirement is going to be successful.Part two next week. We discuss and compare how the distribution options are made, and the differences between these two plans.Martha Myron, JP CPA CFP (US) TEP is an international Certified Financial Planner™ practitioner. She specialises in Financial Counsel for Cross Border Living™ for Bermuda residents with United States and multi-national connections, and US citizens living and working abroad. More information at http://www.marthamyron.com a non-profit financial education website or contact mmyron[AT]patterson-partners.com 296-3528 at Patterson Partners Ltd.