| Definition |
Government-managed retirement program funded through payroll taxes. |
Employer-sponsored or individual retirement savings plans managed privately. |
| Administrator |
Managed by the government (e.g., Social Security Administration). |
Managed by private financial institutions or employers. |
| Participation |
Mandatory for most workers and employers. |
Voluntary participation, often offered as a job benefit. |
| Funding Source |
Payroll taxes collected from employees and employers. |
Contributions from employer, employee, or both; sometimes with government incentives. |
| Returns |
Standardized, fixed, or indexed to inflation. |
Varies depending on investment choices and market performance. |
| Benefit Guarantee |
Usually guaranteed by the government. |
Not guaranteed; depends on plan type and fund performance. |
| Risk |
Low for the individual; borne by the government. |
Risk is shared by employee and employer or entirely on the employee. |
| Portability |
Remains with the individual across jobs. |
Some plans are portable; others depend on employer policy. |
| Payout Timing |
Begins at statutory retirement age (e.g., 60–67 years). |
Flexible; may allow early or deferred withdrawals based on plan rules. |
| Amount Received |
Based on lifetime earnings and contribution history. |
Depends on total contributions and investment performance. |
| Inflation Adjustment |
Often indexed to inflation or cost of living. |
Depends on investment; may or may not keep pace with inflation. |
| Survivor Benefits |
Often includes survivor or dependent benefits. |
Varies; some plans offer spousal or beneficiary options. |
| Disability Coverage |
May include disability insurance as part of the program. |
Separate disability insurance may be needed. |
| Employer Role |
Required to contribute a fixed portion of employee wages. |
May choose to match employee contributions or offer defined benefits. |
| Withdrawal Rules |
Strict; early withdrawal may reduce benefits. |
May allow early access with penalties or under specific conditions. |
| Flexibility |
Low; standardized program rules apply. |
High; various plan types with customizable options. |
| Tax Benefits |
Contributions and benefits may be taxed differently by country. |
Often offers tax-deferred growth or tax deductions on contributions. |
| Examples |
U.S. Social Security, India’s EPFO, UK’s State Pension. |
401(k), IRA, NPS (India), Superannuation funds, etc. |
| Objective |
To provide a basic level of financial security after retirement. |
To build personal wealth for retirement beyond basic government support. |
Social Security vs Private Pension Plans