GROUP ACCUMULATION THROUGH EQUITIES FOR PENSIONS

Abstract

DURING THE LAST several decades, employer-employee pension plans have experienced impressive growth in total membership, contribution and benefit totals, and accumulated invested saving. Today the funded pension structure has become a most important segment in the complex of financial intermediaries and, indeed, as a mobilizer of long-term saving for retirement purposes, is second only to the life insurance companies in magnitude. Even this comparison is subject to the further modification deriving from the very significant part of the business of the life insurance companies which involves the funding of pension plans through various types of group and individual contracts. A large proportion of pension plans by number (although involving a smaller proportion of total pension saving) is funded through the vehicle of pension contracts in life insurance companies. At the present time these pension savings account for about one-fifth of all accumulated saving through life companies and for about one-third of the annual growth in such saving. Furthermore, both these proportions are increasing, so that the investment policy of the life companies is being conditioned more and more by the rising relative importance of their pension obligations. If the pension obligations of the life companies are combined with those of the trusteed plans (including the state and local government pension funds), the resulting employer-employee pension system is comparable in magnitude with the non-pension obligations of the life companies and is growing several times as rapidly. Thus it may be properly said that pensions dominate the long-term saving segment of the system of financial intermediaries and, in turn, have a decisive influence in those sectors of the capital market dealing in long-term financing instruments. This position is particularly evident in the area of long-term corporate financing, where for years the net acquisitions of long-term corporate securities by the pension funds and the life companies