Pension fund

A fund created to achieve long-term growth for retirement.

Because the objective of pension funds is to increase assets for retirement, their basic portfolio structure (the proportion of assets invested in stocks, bonds, real estate and cash) is stipulated by law. Thus, pension funds are not oriented toward any particular investment instrument, although the majority of their assets should be invested in high-quality securities. As a rule, income is reinvested.

When an investor purchases shares in a pension fund, the investment company is required to offer the investor a savings plan with a maturity of at least 18 months. The investor contributes to the fund at regular intervals until he or she has reached the age of 60. At the end of the maturity, the investor can choose between a lump-sum payment or a payment plan in which a fixed amount is paid out each month. This relatively new type of fund will play a major role in the capital market.

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