CHAPTER 20 Large Institutional Investors
WHAT YOU WILL LEARN IN THIS CHAPTER
- The difference between defined benefit (DB) and defined contribution (DC) pension plans.
- Which party—employer or employee—bears investment risk in each type of plan.
- Why increasing employment mobility by workers and risk avoidance by employers has been leading to a shift from DB to DC plans.
- How Social Security is structured and the nature of pension plans offered to state and local government employees.
- Why life insurance companies (LICOs) and pension funds are major institutional investors.
- How actuarial expertise plays a major role in the pricing of life insurance and annuities by LICOs.
- What constitutes the difference between term and permanent policies offered by LICOs.
- How the savings component of permanent policies and the payment for annuities gives rise to substantial amounts of funds to be invested by LICOs.
- How permanent life insurance policies and annuities complement each other from the perspective of LICOs.
- How pension plans and LICOs play a role in the transmission of monetary policy.
BACKGROUND
Whether you realize it or not, pension funds will play a big part in your future, affecting the standard of living you will have at retirement, and, perhaps, even when you decide to retire. Moreover, LICOs, through their annuity products, will provide you with an opportunity to convert the assets that you have accumulated during your working years into a steady stream of income over your ...
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