What financial intermediary invests contributions to provide pension benefit payments during workers' retirements?

A pension fund is a type of financial intermediary specifically designed to hold and manage the contributions made by employees and employers to generate sufficient returns over time. The primary goal of a pension fund is to ensure that money is available to pay out benefits to retirees when they reach retirement age. These funds typically invest in a diverse portfolio of assets, including stocks, bonds, and real estate, with the aim of growing the capital to meet future obligations.

Unlike insurance companies, which primarily provide protection against risks and uncertainties, or mutual funds and hedge funds that focus on pooling investments to achieve specific financial goals for shareholders, a pension fund's primary responsibility is to manage retirement benefits. The structure of pension funds is specifically tailored to accumulate capital over the working life of individuals and systematically provide income during retirement years, making them vital for long-term financial planning for employees.