Highlight three object of the pension scheme
1. Accumulated fund: This is the main object of any pension scheme. It is the pool of funds that are accumulated over time by contributions made by the pension scheme participants. The accumulated fund is used to pay pensions to participants when they retire.
2. Investment strategy: A well-designed pension scheme must have an investment strategy that aims to maximize returns on the accumulated fund while minimizing risks. The investment strategy should be tailored to the risk appetite and investment objectives of the pension scheme participants.
3. Pension benefit calculation: Pension schemes have different methods of calculating pension benefits. Some schemes use defined benefit formulas, while others use defined contribution formulas. The pension benefit calculation is an essential object of the pension scheme as it determines the pension payments that the scheme participants will receive in retirement.
The three key components of a pension scheme are:
1. Contributions: This refers to the regular payments made by both the employee and employer into the pension scheme. Contributions are typically a percentage of the employee's salary and are aimed at building up a pension fund over time.
2. Investment: The pension scheme invests the contributions made by the employee and employer with the goal of generating returns and growing the pension fund. The investment options can include stocks, bonds, mutual funds, and other financial instruments, depending on the pension scheme's investment strategy.
3. Benefits: Ultimately, the purpose of a pension scheme is to provide retirement benefits to the employees. These benefits can be in the form of a regular income, a lump sum payment, or a combination of both. The amount of the benefits is determined by factors such as the employee's salary, years of service, and the performance of the pension fund's investments.