What is the purpose of a pension fund?

The purpose of a pension fund is primarily to accumulate funds for employee retirement benefits. These funds are typically established by employers to ensure that they can provide a stream of income to employees once they retire. This is a critical component of employee benefits, as pension funds help secure financial stability for retirees, allowing them to maintain their standard of living after they have stopped working.

Pension funds achieve this by pooling contributions from both employees and employers over the course of their working lives, investing those contributions in various financial assets, and then disbursing the funds as retirement income. This managed approach provides employees with the assurance that they will have a source of income in their later years, often supplemented by other savings and Social Security.