What is the difference between a pension plan and a pension fund
Probably, throughout our working life we consider hiring a pension plan, to ensure economic independence in our retirement, as well as to complement it with Social Security pensions. However, the concepts of pension plan and pension fund on several occasions can cause confusion, so we will explain the difference that exists between them in this article of .com.
Photo source: glassonline.com
Definition of pension plan and pension fund
A pension plan is a program-institution of a voluntary nature, with the objective of having an economic cushion for the future. It generally determines a right to collect a benefit from the beneficiary and an obligation to contribute to the participants and promoters, which can be any company, society, association, etc. Therefore, their beneficiaries will obtain a certain income in the future when the contingency or situation they have agreed upon, usually retirement or serious dependence.
The pension funds are made up of the equity that will be fulfilled when the time comes to the pension plans to which they are linked. Normally this equity is invested in financial assets, so that it can provide a return over time.
The pension plans and funds are complemented, so that both are necessary to carry out the activity, one can not exist without the other.
Differences between both
Next, we will highlight the differences that exist between funds and pension plans, to be clear about which function each one fulfills:
- A pension plan is a savings-forecast model for the future, but it does not have money on its own, the money is integrated into the pension fund.
- A pension plan can belong to a single fund, but a pension fund can have several pension plans integrated.
- The pension fund has all the capital that is integrated into the plan, which is invested to obtain profitability, while in the pension plan it manages as is the savings model .
- A pension fund has a capital management entity, and a depository entity that contains it, elements that do not exist in a pension plan.
