Risk For Pension Fund Providers
- Topics:
- Commercial Lending
- Tags:
- Benefits,
- Rationale,
- Pension Fund,
- Pension,
- Payroll Solutions,
- Investment,
- Imbalance,
- Human Resources,
- Finance,
- Essay,
- ...
- Source:
- State Street
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Overview: For any company considering whether to offer (or continue to offer) a traditional defined benefit (DB) pension scheme, the fundamental issue is whether the benefit of doing so justifies the cost. The rationale is clear: in providing a desirable benefit for employees, the company hopes to attract and then retain the caliber of staff it requires. The main costs are twofold: the direct cost of the employer's contributions to the scheme, and the contingent risk that the scheme will need “topping up" if the fund financing it runs into deficit. This essay will highlight a third reason for closures, the increasing imbalance of risk for pension scheme providers. This imbalance will continue to affect companies' decisions and the attractiveness of providing a DB pension scheme even if equity markets were to recover their buoyancy, and therefore needs a new solution. The essay concludes by suggesting that bond issuance by sponsoring companies to repair pension fund deficits may be one way forward.
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Format: PDF | Size: 169KB | Date: Oct 2003 | Pages: 2
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