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| Asked by:
Anonymous on Jun-01-2008 01:55:50 | |
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.png) | What is the difference between a Pension Fund and Provident Fund |
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| Answer
1 Contributor: prophetess on Jun-02-2008 11:01:40 |
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A Pension fund is a 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.
Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors like the Ontario Teachers' Pension Plan dominate. The largest 300 pension funds collectively hold about $6 trillion in assets. In January 2008, The Economist reported that Morgan Stanley estimates that pension funds world-wide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign-wealth funds, hedge funds, or private equity.
Provident fund
The Central Provident Fund (Abbreviation: CPF; Chinese: 公积金, Pinyin: Gōngjījīn) is a compulsory comprehensive social security savings plan which aims to provide working Singaporeans with a sense of security and confidence in their old age. It is administered by the Central Provident Fund Board, a statutory board under the Ministry of Manpower. The CPF was started on 1 July 1955.
Mandatory Provident Fund (traditional Chinese: 強制性公積金), often abbreviated as MPF (強積金), is a compulsory saving scheme for the retirement of residents in Hong Kong. Most of employees and their employers are required to contribute monthly to Mandatory Provident Fund Schemes provided by approved private organisations, according to their salaries and the period of employment.
In traditional Chinese society, a retired person was supposed to be supported by his family and his savings, thus a extended family formed a safety net. Life expectancy was comparatively low compared to today.
As Hong Kong become a developed entity, life expectancy in the territory improved greatly and the birth rate dropped significantly. Extended family were broken into nuclear family. Hong Kong's social security system will be unable to cope with the large number of elderly in the future. There were some calls to establish a central provident fund and heated debates between government, politicians and trade unions ensued in the early 1990s.
In 1994, the World Bank published the report "Averting the Old-Age Crisis: Policies to Protect the Old and Promote Growth", in which a three-pillar approach to protection for the aged was put forward.
The three pillars were:
* a publicly managed, tax-financed social safety net;
* a mandatory, privately managed fully funded contribution scheme;
* voluntary personal savings and insurance.
The MPF System in Hong Kong was designed to form the second pillar of this approach for retirement protection.
The Employees Provident Fund (Abbreviation: EPF) also known in Malay as Kumpulan Wang Simpanan Pekerja (Abbreviation: KWSP) is a government organisation in charge of social security or retirement planning for legally employed workers in Malaysia. Membership to the EPF is mandatory for working Malaysian citizens, or non-Malaysian citizens who are either permanent residents or have been EPF members before 1 August, 1998.
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