Most employees can now look forward to a retirement lasting twenty years and some will live for more than thirty years after retiring. Income in retirement comes from various sources, with the basic level generally being met by state provision. In a few countries state provision is still sufficient to cover all the needs of most employees, but in most countries the state provides at best only basic cover. Individuals need to look either to their employers or to private savings to provide sufficient income in retirement.

Companies in many countries have found that to attract and retain a loyal workforce, it has become necessary to offer an attractive occupational pension to supplement state provision. Because of the substantial sums needed (often amounting to several times annual pay by retirement), pension benefits are often the most expensive element of a remuneration package after direct pay itself. A company first needs to satisfy itself why corporate provision should be made for pensions rather than leave the employee wholly to their own devices. Having established this, the next step is to design a package of benefits to meet the requirements of both employee and employer, including not just the quantum of benefit, but also how any investment risks involved should be shared.

In most countries pension funds are given attractive tax concessions to encourage saving for retirement. Often, limits will be put on the amount of provision that could be made in order to limit the extent of that tax advantage, and account would need to be taken of these limits in designing benefit implications. Because pension benefits will be paid many years after the service giving rise to them was completed, by which time the company may no longer exist, it is usual for contributions to corporate pension funds to be paid to an independent fund and invested over the long interim period. Decisions will need to be made about how such assets should be invested, and how the cost is to be met over time, which will depend in part on accounting principles and practices, and in part on the need for security for members, which may involve minimum levels set by legislation.

Despite being simple in concept, corporate pensions are complex in practice, because of the various constraints on them. Proper administration and communication with employees is necessary to ensure their worth is appreciated.