ELi5 how do pension funds generate a surplus?
In: 10
Corporation can have pension funds as a lender. They would borrow money, pay interest on the lent money, and generate a return for the pension. This is generally how pensions make money to fund the future liability. There are bits about inflation linked borrowing and whatnot, but that’s more nitty gritty details. The important part is the pension has alot of money that it doesn’t need now but will need later and the corporation needs alot of money now and hopes to grow their business so that they can pay it back later.
EDIT: I don’t mean they can borrow from their own pension funds. That is super illegal.
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