What is the difference between a defined benefit superannuation and a cumulative benefit policy?

Defined benefit superannuation and cumulative superannuation are two different types of retirement savings plans.

A defined benefit superannuation plan is a retirement plan where the employer guarantees a specific retirement benefit to the employee based on a formula that takes into account the employee's salary and length of service. The employer is responsible for investing the funds and managing the risks associated with the plan.

On the other hand, a cumulative superannuation plan is a retirement plan where the employee contributes a portion of their salary into a retirement account, and the employer may also make contributions. The funds are invested in a range of investment options, and the final benefit is based on the amount of contributions made, the investment returns earned, and any fees or charges deducted.

The key difference between the two plans is that in a defined benefit plan, the employer bears the investment risk and guarantees a specific benefit to the employee, while in a cumulative plan, the employee bears the investment risk and the final benefit is based on the accumulated contributions and investment returns.