Business, Legal & Accounting Glossary
A pension fund is an entity set up to collect monies from employer(s) and workers, invest the proceeds in securities and other assets, and pay benefits to retirees from the fund’s accumulated resources. A pension fund ordinarily has an investment policy statement that describes the nature of the assets in which the pension fund can invest. Traditionally, the investment plan of a pension fund has been quite conservative, sometimes limiting its investment vehicles to government bonds or life insurance annuities. In recent decades, the average pension fund has assumed a more aggressive investment posture to achieve the higher returns required by its obligations. A pension fund often amasses large pools of funds: the pension fund of the California teachers, for example, had some $116 billion in assets in 2004. Because of its huge resources, a pension fund may have considerable clout in the investment community and use its influence to achieve social goals. In other cases, however, a pension fund will work only to achieve the highest returns possible for its retiree beneficiaries.
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This glossary post was last updated: 6th February, 2020