Let's get straight to the point.
There are two defining features of a pension fund:
· One that it accumulates investment and creates wealth while you are earning. This usually spans around 30-35 years of your life.
· Second is a pension fund that enables the payback of this income to you after you have retired. This usually spans around 20-25 years of your retirement life.
Since pension funds have such long investment periods, governments see them as important financing tool. Therefore, they provide tax sops and even in some cases make it mandatory to push these investments.
To reiterate, typically, pension funds tend to have the following characteristics: Accumulation of investment; generation of wealth; some time freeze on liquidity; tax relief and disbursement post-maturity.
Pension investments have a sacred role in a person's old-age upkeep. Therefore, most are afraid of taking any risk on the pension investment amount. At the most, the investor begins taking risk, but in staged manner, reduces the risk exposure.
