The defined contribution system is a method of defining the retirement benefits of pension funds in which all contributions are recorded and the benefits are derived on their basis. The capital saved by an insured person during his or her working life is made up of the savings contributions paid in and any additional payments and earns interest annually until retirement. At the time of retirement, it is usually converted into a pension (basis: conversion rate). The benefits that the insured person receives after retirement are therefore directly dependent on the amount of contributions paid in. The majority of Swiss pension funds operate on a defined contribution basis. See also defined benefit system.