Pension funds are in the national public interest and the legislative language explicitly defines such funds in various laws. Pension funds perform important economic functions, such as mobilizing and managing savings, providing income stability, making labor markets more efficient and providing exposure to systemic risk in the financial markets.
Pension fund investments include conventional securities, such as stocks and bonds, real estate and alternative investments, such as hedge funds and structured securities. Pension fund investment portfolios also include derivatives.
Making a pension fund choice is important, since it will affect your income after retirement. Different types of investments in pension funds have different levels of volatility. Usually the funds offered fall into the following categories:
· Cash: This means money saved for deposit either in a bank or financial institution.
· Bonds: These are either government or private loans that pay a rate of interest until the loan is repaid.
· Property: This is money invested in land or buildings.
· Equities: Are shares in private companies.
There are two types of pension funds:
· Open Fund
· Closed Fund
o Single employer pension funds
o Multi employer pension funds
o Related member pension funds
o Individual pension funds
The types of pension funds are:
· Pension fund
· Provident fund
· Retirement annuity fund