Further
Information on Pensions, Pension Funds & Pension Schemes:
A pension
is classed as a steady income given to a person, usually after
retirement. Pensions
are typically payments made in the form of a guaranteed annuity
to a retired or disabled employee. Some retirement plan designs
accumulate a cash balance through a selection of mechanisms
that a retiree can draw upon at retirement, rather than promising
annuity payments. These are often also called pensions.
In either case, a pension created by an employer for the benefit
of an employee is commonly referred to as an occupational or
employer pension. Unions, the government, or other organisations
may also fund pensions.
Occupational pensions are a form of deferred compensation, usually
advantageous to employee and employer for tax reasons. Many
pensions
also contain an insurance aspect, since they often will pay
benefits to survivors or disabled beneficiaries, while annuity
income insures against the risk of longevity.
While other vehicles (an annuity
for example) may provide a similar stream of payments, the common
use of the term pension is to describe the payments a person
receives upon retirement, usually under pre-determined legal
and/or contractual terms.
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Market
structure
The market for pension fund investments
is still centred around Anglo-Saxon economies. As of 2005 the
United States was the largest market for pension fund investments
followed by the UK.
Pension reforms have gained significant pace worldwide in recent
years and funded arrangements are likely to play an increasingly
important role in delivering retirement income security and also
affect securities markets in future years.
What
is a Pension fund?
A Pension fund is a pool of assets forming an independent legal
entity that are bought with the contributions to a pension
plan for the exclusive purpose of financing pension
plan benefits.
Pension funds are important shareholders of listed and private
companies. They are especially important to the stock market where
large institutional investors dominate. The Economist reported
that Morgan Stanley estimates that pension funds world-wide hold
over £10 trillion in assets, the largest for any category
of investor ahead of mutual funds, insurance companies, currency
reserves, sovereign-wealth funds, hedge funds, or private equity.
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Open versus closed pension funds
Open pension
funds support at least one pension plan with no restriction
on membership while closed pension funds support only pension
plans that are limited to certain employees.
Closed pension funds are further sub-classified into:
- Single employer pension funds
- Multi-employer pension funds
- Related member pension funds
- Individual pension funds
Public
versus private pension funds
A public pension fund is one that is regulated under public sector
law while a private pension fund is regulated under private sector
law. In certain countries the distinction between public or government
pension funds and private pension funds may be difficult to assess.
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Source
of Information: Wikipedia
Honest Johnny does not supply financial advice. All information
contained herein this website should not be construed or taken
as advice. Please consult your IFA for advice.
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