Introduction
Pension fund refers to a type of investment tool that provides income to individuals after they retire or stop working. It collects funds from contributors (employees, employers or both) and invests in different financial instruments like bonds, stocks, bonds, real estate etc. Government agencies, private companies or financial institutions manage pension funds. Pensions funds are reliable source of income for retirees.
Why Pension Funds Are Important ?
The main importance of pension funds can be highlighted as follows:
1. Provide Retirement Security
One of the most important benefits of pension funds is that it provides financial security for retirees. It provides a reliable income stream that helps them to maintain their standard of living.
2. Promote Financial Discipline
Pension funds encourage employees to save money to get retirement benefit. So, these funds help to maintain financial discipline.
3. Tax Benefits
Investments made on pension funds are deducted from taxable income that helps to save taxes. Therefore, pension funds provide tax benefits to employees.
4. Attract Competent Manpower
As we know that pensions funds offer retirement benefit to the employees, organizations can attract talented and competent employees by offering pension plan.
5. Employees Retention
Pension plan helps to motivate the employees and improve their morale because of long-term financial benefit. It helps to increase employee retention rate and lowers employee turnover.
6. Capital Formation
Individuals contribute certain amount of income every month that can be invested in different profitable sectors like real estate, bonds, stocks etc.. So, pension funds are important for capital formation that provide investment opportunities.
7. Promote Economic Growth
Funds are invested in various sectors that help in economic growth of the country. Pension funds also promote infrastructure development and innovation which are essential for development and economic stability.
Key Benefits Of Pension Fund In Short
* It promotes saving culture
* It helps to attract and retain employees
* It provides financial protection after retirement
* It provides tax advantages
* It promotes infrastructure development and innovation
* It is essential for economic growth
* It provides global investment opportunities
* It minimizes government financial burden