Retirement & Pension Management
Description
Entities in this industry include funds, plans, and other programs that provide retirement income benefits for an organization's employees or members. Major retirement plans include the California Public Employees' Retirement System, the California State Teachers' Retirement System, the Federal Retirement Thrift Savings Plan, and the New York State Common Retirement Fund (all US-based). Outside the US, major funds include the Central Provident Fund (Singapore), Government Employees Pension Fund (South Africa), Ontario Teachers' Pension Plan (Canada), and Stichting Pensioenfonds (Netherlands).
Countries with the largest pension funds include the US, Canada, the UK, and Australia, according to the Organisation for Economic Co-operation and Development (OECD). Because they can control extremely large amounts of capital, pension funds may represent the largest institutional investors in many nations.
About 25,000 US private-sector pension plans are insured, according to Pension Benefit Guaranty Corporation (PBGC).
COMPETITIVE LANDSCAPE
Demand is affected by the global economic conditions and demographic trends. The profitability of individual companies depends on investment expertise. Large companies have economies of scale in operations. Small companies can compete effectively by specializing in desirable sectors and by producing higher investment returns.
Mutual fund management companies may also handle management of retirement funds through benefits outsourcing and retirement planning services, and may be considered competitors.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major retirement products include defined benefit (DB) plans and defined contribution (DC) plans. In a DB plan, an employer guarantees an employee will receive a fixed payout once retired. In a DC plan, the employer does not guarantee any benefits. A pension is a type of DB plan. Popular types of DC plans include the 401(k)and the IRA (Individual Retirement Account). As of 2024, 401(k) plans held over $9.3 trillion, according to the Investment Company Institute (ICI).
Plan officials manage a DB investment, and the employer is responsible for ensuring that the amount it has put in the plan plus investment earnings will be enough to pay the promised benefit. At retirement, a DB plan may promise a specific monthly benefit as an exact dollar amount, such as $100 per month, or it may calculate the benefit through a formula that includes factors such as the individual's salary, age, and the number of years worked at the company. Most plan participants need to be employed for a certain number of years (typically five) to be fully "vested" in the plan. If a worker leaves before the allotted time, he or she may forfeit any unvested pension benefits.
In a DC plan, the employee contributes money to an individual account through a predetermined contribution taken from his or her paycheck. The employee is often responsible for managing the investment and deciding how much to contribute through pre-tax deductions. An employer may add to the account, in some cases by matching a certain percentage of the employee's contributions. The value of the account depends on how much is contributed and how well the investments perform. At retirement, the employee receives the balance in the account, reflecting the contributions, investment gains or losses, and any fees charged against the account.
Asset allocation is essential to the investment performance of a retirement plan. In order to insulate portfolios from short-term market fluctuations, most pension systems attempt to diversify their investments across a range asset classes and financial vehicles, including company stock, other stocks, bonds, and real estate.
Countries with the largest pension funds include the US, Canada, the UK, and Australia, according to the Organisation for Economic Co-operation and Development (OECD). Because they can control extremely large amounts of capital, pension funds may represent the largest institutional investors in many nations.
About 25,000 US private-sector pension plans are insured, according to Pension Benefit Guaranty Corporation (PBGC).
COMPETITIVE LANDSCAPE
Demand is affected by the global economic conditions and demographic trends. The profitability of individual companies depends on investment expertise. Large companies have economies of scale in operations. Small companies can compete effectively by specializing in desirable sectors and by producing higher investment returns.
Mutual fund management companies may also handle management of retirement funds through benefits outsourcing and retirement planning services, and may be considered competitors.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major retirement products include defined benefit (DB) plans and defined contribution (DC) plans. In a DB plan, an employer guarantees an employee will receive a fixed payout once retired. In a DC plan, the employer does not guarantee any benefits. A pension is a type of DB plan. Popular types of DC plans include the 401(k)and the IRA (Individual Retirement Account). As of 2024, 401(k) plans held over $9.3 trillion, according to the Investment Company Institute (ICI).
Plan officials manage a DB investment, and the employer is responsible for ensuring that the amount it has put in the plan plus investment earnings will be enough to pay the promised benefit. At retirement, a DB plan may promise a specific monthly benefit as an exact dollar amount, such as $100 per month, or it may calculate the benefit through a formula that includes factors such as the individual's salary, age, and the number of years worked at the company. Most plan participants need to be employed for a certain number of years (typically five) to be fully "vested" in the plan. If a worker leaves before the allotted time, he or she may forfeit any unvested pension benefits.
In a DC plan, the employee contributes money to an individual account through a predetermined contribution taken from his or her paycheck. The employee is often responsible for managing the investment and deciding how much to contribute through pre-tax deductions. An employer may add to the account, in some cases by matching a certain percentage of the employee's contributions. The value of the account depends on how much is contributed and how well the investments perform. At retirement, the employee receives the balance in the account, reflecting the contributions, investment gains or losses, and any fees charged against the account.
Asset allocation is essential to the investment performance of a retirement plan. In order to insulate portfolios from short-term market fluctuations, most pension systems attempt to diversify their investments across a range asset classes and financial vehicles, including company stock, other stocks, bonds, and real estate.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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