Pension Fund (Pensionskasse)

Concept

A pension fund is a legally independent occupational pension provider established by one or more sponsoring employers to provide their employees with protection against the biometric risks of old age, disability, and death, in the form of annuity or lump-sum benefits. Legally, it sits between insurance-based provision through a life insurer and a direct pension promise made by the employer.

Funding and Supervision

Pension funds are generally funded on a capital-reserve basis through employer contributions, frequently supplemented by contributions from the employees themselves; unlike a pure support fund, a pension fund is subject in many jurisdictions to regulatory supervision comparable to that of life insurance, including requirements regarding capital resources and the actuarial valuation of liabilities.

Relevance within the Mix of Occupational Pension Vehicles

The pension fund is one of several possible vehicles for occupational pension provision and competes with alternatives such as direct insurance, the pension fund vehicle known as a Pensionsfonds, and a direct pension promise; the choice of the appropriate vehicle depends significantly on tax, accounting, and regulatory considerations of the sponsoring employer, as well as on its size and risk-bearing capacity.