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Financing benefits (1) (pay-as-you-go (unfunded)
Involves paying for…
Financing benefits (1)
pay-as-you-go (unfunded)
Involves paying for benefits as they fall due,
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Lump sum in advance
Setting aside funds expected to be sufficient to meet the cost of the benefit as soon as the benefit promise is made.
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Terminal funding
Setting aside funds expected to be sufficient to meet the cost of a series of benefit tranches as soon as the first tranche becomes payable
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Regular contributions
Setting aside funds gradually, expected to be sufficient to meet the cost of the benefit over the period between the promised being made and the benefit first becoming payable.
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Just-in-time
Setting up funds that are expected to be sufficient to meet the cost of the benefit as soon as a risk arises in relation to the future financing of the benefits e.g. bankruptcy or change in control
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