Financial Management Individual Work 1 Week 12 Essay

Financial Management Individual Work 1 Week 12 - Essay Example One of the commonest features is that they at transferring production to individuals who are no longer involved in the process of production. This is a link between the present group of workers with the past workers who have reached the retirement age. Other features include the need for employees to be eligible in order to be part of a pensionable plan and varied statutory limitations that are related to the contribution and the benefit under the plan (Hustead, 2001). Another feature is that participants under the plan accrue contribution and upon attainment of the normal retirement age, they receive the vested portion of the benefits. Pension fund management involves investment of assets in order to achieve the long term goal of providing funding for retirement (Cohen, 2007). Because of the huge amount of importance that pension funds hold over the long term financial well being of the recipients, managing the fund has become very crucial in organizations. However, individuals who oversee pension funds face challenges that keep on evolving with changes in the business environment, for example, challenges driven by factors like national legislation. Another concern relates to good governance because funds need to be well run by skilled employees at the management level and there needs to be effective supervisory board. Lack of skilled employees increases the risk of mismanagement of funds which is depended on by the beneficiaries. Inflation has remained one of the major concerns when managing pension schemes. This is because pension schemes are usually exposed to a rise in inflation as most of the pension funds paid are inflation-linked. Managers need to find ways of dealing with inflation, for example, by hedging through investing in swaps and index-linked bonds. If these options are preferred, another challenge comes up where a question comes up as to whether a company wants to deal with inflation expensively because index-linked bonds and