What are the main differences between the reserve Fund and the Pension Fund?


Provident funds and pension funds types of pension plans used around the world, but their specifics differ from region to region. Reserve funds are prominent in Asia and Mexico, generally operating as social security in the United States. Pension funds, also known as pension funds or, more specifically, defined benefit plans offered by employers and governments, usually provide pensions to participants equal part of their labor income. There are some differences in how contributions are made and benefits; the most significant differences depend on how the payments are made.

The members of the provident funds have the opportunity to take part of their pension benefits, usually one third or one fourth in lump sum in advance. Other benefits are distributed in monthly payments. On retirement, the pension funds can take out as much of their benefits as they wish in a lump sum, although it is more common to obtain monthly payments. The tax treatment of lump sum withdrawals and vary by region, but typically only a portion of provident Fund lump sum tax-free. Payments to the Pension Fund are not taxed.

Some pension funds may allow individual participants to choose investments and contribution amounts, while most of the savings of mandatory contributions and startup investment. Unlike US social security, some savings accounts of the Fund are held in individual names, not United in a single trust Fund account.

In a sense, the benefits of a Pension Fund is more similar to rents, while the benefits of the reserve Fund are offered much more flexibility in payments. Another important difference lies in the mandatory nature of contributions to the reserve Fund.

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