A pension fund is a type of investment fund whose purpose is to manage the monetary flows of pension plans .
Pension funds are nourished by the money that the clients of a pension plan contribute. That money is invested. And to invest it in different products such as stocks or bonds, the pension fund is used. Which is responsible for making these savings profitable.
Characteristics of pension funds
Pension funds have peculiar characteristics. Some are common to traditional investment funds and others are not.
- Like traditional investment funds, they have no legal personality.
- They are managed by a managing entity and the titles they acquire are guarded by a depository entity.
In addition, it should be noted that an investment fund can be created with the objective of being exclusive to a specific pension plan. However, it is usual for the same pension fund to manage money from different pension plans.
This last fact allows the existence of small pension plans in monetary volume. Since otherwise, they would not have enough capital to create their own pension fund.
In Spain, they are supervised by the General Directorate of Insurance and Pension Funds (DGSFP).
Difference between pension fund and pension plan
They are usually terms that are used as synonyms. Of course, how we have seen are different concepts.
The pension plan is the financial product that the client hires and to which he contributes money in order to collect income on his retirement. For its part, the pension fund is the financial vehicle that allows customers to invest money in different products.
For example, let’s imagine that we contract a pension plan of the company «Pensionistaplus» and each month we contribute 100 euros. Those 100 euros are added to the pension fund that manages the money of the pension plan “Pensionistaplus”. The pension fund is called “Fondopensionplus”.