What is a pension fund?

Pension Fund is a combined money fund from the employer and its employees to finance future payments to employees. It is usually used for pensions that the employer provides primarily by the employer than stored by the employee. Pension Fund operates according to the relevant national laws that regulate how the money is controlled and assigned.

There are two main types of pension plan in most countries. The private pension plan includes individuals, usually an employee depositing in a private plan operated by a financial company. The most common example in the United States in individual retirement. The only involvement of the employer with the plan is to deduct money from the employee's wage and send it to the plan and in some cases contribute to the plan as an employment form. This is usually done through a pension ward. The employer acts as the administratorE and holds money on behalf of the startora, which is an employee. Although the administrator has a legal control of money, the rules of the trust fund forces them to act in the interest of the settling and observe the agreed procedures.

One of the main advantages of the pension fund is that it allows money from pension savings more employees are connected for investment. This can reduce administrative costs. It can also provide more negotiating power to the fund investors, which means they can be able to buy or sell investments for more favorable rates.

Another main advantage of the pension fund is to protect savings. Theoretically, the employer will not be able to use money in the fund for its own purposes. In practice, this happened in some Cases and many countries have brought stricter regulations to prevent abuse.

The biggest disadvantage of the pension fund and society in general isThe fact that many such plans guarantee to pay a certain level of pension, often based on the employee's salary after retirement. This is contrary to most private plans where the pension depends on how well the investment works. This creates a risk that the pension fund does not have to have enough money to pay guaranteed pensions if the investment does not go as well as it is planned. In some cases, the establishment of a pension trust fund relies on the money invested by current employees to provide pensions of people who retire. This may be problematic if demographic changes, such as "baby boomers" reaching the age of retirement, create an imbalance between employees and pensioners.