Pension Fund Literature Review
The chapter synthesizes on the current literature that is germane to the pension funds and the operation of the pensions industry. It seeks to situate the current study within the body of extensive relevant literature. The literature review is reviewed in accordance with conceptual frameworks and empirical literature. The chapter also offers the basis for discussing and analysing the research findings in later chapters. The literature review is put in the following sections which aims to explore the area of study and provide answers to questions outlined in chapter one. a) What is a pension fund and how does it operate? b) What factors determine the amount of pension one gets? c) Which challenges in the pension fund industry have contributed …show more content…
Pooling and diversification is a fundamental characteristic of pension funds. The meaning of a pension fund is further explained by the Organisation for Economic Cooperation and Development (OECD) (2005) as, “The pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The plan/fund members have a legal or beneficial right or some other contractual claim against the assets of the pension fund.” Jefferis and Tabengwa (1999) also view a pension fund as a form of contractual savings, in that they involve a contract to save regularly which is in most cases monthly, over a relatively long period of time. In the meantime, the accumulated contributions are invested in order to generate further returns that supplement the value of the fund and hence boost the value of the future pension that can be paid out. A pension is then defined by Princeton University online dictionary, (cited in Chowa et al., 2014), as a post retirement benefit that is received by an employee from his/her employer’s retirement plan whose main aim is to provide a regular source of subsistence to the non-working …show more content…
Broadbent (2006), states that the contributions of employees are deducted directly from their respective salaries and normally these contributions are matched by the employer or even contribute a greater portion than the employees. In contrast to a DB plan, under DC plans it is the contributions that are fixed rather than the benefit, there is no guaranteed or predetermined income under this pension
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