Pension Trust

Definition - What does Pension Trust mean?

A pension trust is an employee retirement fund that is funded by both the employer and the employee. The monetary contributions from both parties are handed over to a legal trustee who will follow the accounting standards of the United States.

Before this money is converted into a retirement income, it might also be invested to maximize later withdrawals.

Insuranceopedia explains Pension Trust

The pension trust involves three parties: the trustee, the employer, and the employee-beneficiary. The trustee can be a third party entity, that is, someone who is not part of the workplace and is appointed solely to handle the trust. This frees the employer from administrative duties. The trustee constantly notifies the employer and the employee of any developments regarding the trust.

The trustee has legal and ethical obligations, including working for the benefit of the of the beneficiary. Its decisions, therefore, aim to increase the funds of the trust without putting them in unreasonable jeopardy. The trustee can invest the contributions prudently so that the beneficiary's pension will be greater than the sum of the contributions made by the employee and employer.

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