• A pension fund is a fund set up by an employer for the benefit of the staff. When a member of the staff finally retires, she will receive funds from the pension fund. If the employee dies before being able to claim her benefits, then her benefits will be rendered in a lump sum to her heirs. While pension plans have been a common tool for employee retirement, employees should be aware of several risks associated with pensions---and the funds invested in them.
  
  

Freezing

• One major risk of a pension plan is that the employer may choose to freeze it at any time. A pension is not something legally guaranteed like Social Security, and the employer may choose to simply freeze the funds in the pension plan for a variety of reasons. This is problematic for employees, though; if those funds are still frozen when they retire, they won't be able to actually get to their own retirement fund contributions (frozen accounts can have money put in, but not taken out). Even if the freeze is temporary, it can seriously impact former staff members who are depending on their pension checks.
  
  

Investing

• Another danger that's plagued pension plans in the past is that in order to increase the pension fund, employers have to invest the funds in the account. Some investments, like savings accounts, money market accounts, or U.S. bonds are extremely safe investments, and shouldn't worry pensioners. However, some employers may choose to make riskier investments with the pension plan such as buying stock, or trading in various markets. These investments have the potential to greatly increase the size of the pension fund, but they also have a bigger chance of losing money. This is by far a bigger risk to pensioners than it is to the company.
  
  

Taxes

• Money that retirees make from their pension plan is taxable income. Unlike Social Security or Roth IRA accounts, retirement funds (unless they come from an IRA or other tax-free account) will have to be accounted for every April. This isn't a risk to the pension so much as it is a risk to the pensioner, because if you don't know whether or not your income is taxable then you might find yourself in a serious bind come tax time. This is even more true if your retirement funds are only slightly above the bare minimum you need in order to pay your day-to-day expenses.