A pension fund, also known as a superannuation

fund in some countries, is any plan, fund, or scheme

which provides retirement income.
Pension funds in 2005
Pension funds typically have large amounts of
money to invest and are the major investors in listed
and private companies. They are especially
important to the stock market where large
institutional investors dominate. The largest 300
pension funds collectively hold about $6 trillion in
assets.[1] In January 2008, The Economist reported
that Morgan Stanley estimates that pension funds
worldwide hold over US$20 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.
DEFINITION of 'Pension Fund'

Also known as "qualified benefit plan" or "nonqualified benefit plan."

BREAKING DOWN 'Defined-Benefit Plan'
This fund is different from many pension funds
where payouts are somewhat dependent on the
return of the invested funds. Therefore, employers
will need to dip into the companies earnings in the
event that the returns from the investments devoted
to funding the employee's retirement result in a
funding shortfall. The payouts made to retiring
employees participating in defined-benefit plans are
determined by more personalized factors, like
length of employment.
A tax-qualified benefit plan, shares the same
characteristics of a defined-benefit plan, but also
provides the beneficiary of the plan with added tax
incentives. These tax incentives are not realized
under non-qualified plans.

A fund established by an employer to facilitate and

organize the investment of employees' retirement
funds contributed by the employer and employees.
The pension fund is a common asset pool meant to
generate stable growth over the long term, and
provide pensions for employees when they reach
the end of their working years and commence
retirement.

DEFINITION of 'Defined-Contribution Plan'

BREAKING DOWN 'Pension Fund'

There is no way to know how much the plan will

ultimately give the employee upon retiring. The
amount contributed is fixed, but the benefit is not.

Pension funds are commonly run by some sort of

financial intermediary for the company and its
employees, although some larger corporations
operate their pension funds in-house. Pension funds
control relatively large amounts of capital and
represent the largest institutional investors in many
nations.
DEFINITION of 'Defined-Benefit Plan'
An employer-sponsored retirement plan where
employee benefits are sorted out based on a formula
using factors such as salary history and duration of
employment. Investment risk and portfolio
management are entirely under the control of the
company. There are also restrictions on when and
how you can withdraw these funds without
penalties.

A retirement plan in which a certain amount or

percentage of money is set aside each year by a
company for the benefit of the employee. There are
restrictions as to when and how you can withdraw
these funds without penalties.
BREAKING DOWN 'Defined-Contribution Plan'

DEFINITION of 'Cash Balance Pension Plan'

A pension plan under which an employer credits a
participant's account with a set percentage of his or
her yearly compensation plus interest charges. A
cash balance pension plan is a defined-benefit plan.
As such, the plan's funding limits, funding
requirements and investment risk are based on
defined-benefit requirements: as changes in the
portfolio do not affect the final benefits to be
received by the participant upon retirement or
termination, the company solely bears all ownership
of profits and losses in the portfolio.

BREAKING DOWN 'Cash Balance Pension Plan'

Although the cash balance pension plan is a
defined-benefit plan, unlike the regular definedbenefit plan, the cash balance plan is maintained on
an individual account basis, much like a definedcontribution plan. The cash balance plan acts
similar to a defined-contribution plan also because
changes in the value of the participant's portfolio
does not affect the yearly contribution.
hybrid pension plan
Definition
Pension plans that have elements of defined benefit
plans and defined contributions. Usually involved
the benefit for the participant being awarded as a
lump sum instead of as an annuity. These types of
plans are regulated as defined benefit plans.
Examples of hybrid pension plans include cash
balance and pension equity plans.
A pension is a fixed sum to be paid regularly to a
person, typically following retirement from service.
There are many different types of pensions,
including defined benefit plans, defined
contribution plans, as well as several others.[1]
Pensions should not be confused with severance
pay; the former is paid in regular installments, while
the latter is paid in one lump sum.
The terms retirement plan and superannuation tend
to refer to a pension granted upon retirement of the

individual.[2] Retirement plans may be set up by

employers, insurance companies, the government or
other institutions such as employer associations or
trade unions. Called retirement plans in the United
States, they are commonly known as pension
schemes in the United Kingdom and Ireland and
superannuation plans (or super[3]) in Australia and
New Zealand. Retirement pensions are typically in
the form of a guaranteed life annuity, thus insuring
against the risk of longevity.
A pension created by an employer for the benefit of
an employee is commonly referred to as an
occupational or employer pension. Labor unions,
the government, or other organizations 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 additional insurance
aspect, since they often will pay benefits to
survivors or disabled beneficiaries. Other vehicles
(certain lottery payouts, for example, or an annuity)
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 or contractual
terms. A recipient of a retirement pension is known
as a pensioner or retiree.