It is a fund established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and employees. The pension fund is a common asset pool meant to generate stable growth over the long term, and provide pensions for employees when they reach the end of their working years and commence retirement.
All full time permanent employees are eligible for participation.
The employer and employee both contribute towards this scheme which is expressed as a percentage of the salary bill. This is depends on the affordability of the employer. The employer will pay administration charges over and above these contributions.
A fund must select a common retirement age known as the normal retirement age and this must be between 55 years and 70 years. It is common to have 65 years as the normal retiring age. An employee may however retire earlier than age 55 on account of ill health. An employee may also defer retirement beyond age 65 years but must retire at age 70 years.
A lump sum payment is made out to the surviving spouse/children/dependents on death/retirement of the employee which is 1/3 of accumulated amount. The remaining amount is used to purchase a pension.