Pensions

A pension is 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 (or superannuation) designs accumulate a cash balance (through a variety 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. 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 insurance aspect, since they often will pay benefits to survivors or disabled beneficiaries, while annuity income insures against the risk of longevity.

The market for pension fund investments is still centred around Anglo-Saxon economies. Japan and the EU are conspicuous by absence. As of 2005 the U.S. was the largest market for pension fund investments followed by the UK.

Pension reforms have gained 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.