Due to recent rises in gold and foreign currency, those who invested in pension funds have reportedly earned at least a 13.8% profit. Demand for the private pension system surged during the pandemic, and the return across all pension funds for the first eight months of 2020 reached 15.9%.
Investors in Funds Profited
Participants who allocated assets to funds within the private pension system achieved notable gains in the first eight months of 2020. The Private Pension Participation Directorate reported that gold funds within the system drew especially strong interest during this period. With rising prices, traditional gold buyers increasingly turned to gold funds in the pension system, and interest in interest-free gold accounts also grew. From January through the end of August 2020, gold funds delivered an average return of around 57%. Within interest-free funds, gold funds represented roughly 53% of assets, while gold funds’ share of conventional (interest-bearing) funds was about 15%. When split between interest-free and conventional funds, interest-free funds delivered approximately 42% returns, while conventional funds returned around 12%.
More Than Twice the Inflation Increase
Examining fund returns from January 2020 onward shows increases across all pension funds. Aggregate returns reached about 15.9%, while seven-month inflation measured from the start of the year to the present stood at roughly 6.71%. This means participants in the private pension system outpaced inflation by more than double during this period.
If current conditions persist, private pension participants are expected to further increase their returns by year-end. Participants who hold pension funds—whether interest-free or conventional—and manage them appropriately can boost their returns. Rising foreign exchange and gold prices have also helped pension participants who evaluate their portfolios based on these instruments to realize gains.
How Are Funds Chosen in Private Pensions?
The private pension system functions primarily as a savings vehicle, generating returns through fund performance. When funds are managed well, participants can achieve gains. Private pension funds are used to invest contributions paid by participants and, where applicable, by employers. The system offers both interest-bearing and interest-free fund options. Fund types are determined according to the underlying investment instruments, such as government debt instruments, equities, deposits, and others. Pension funds can only be purchased within the private pension framework, and because these funds are not subject to withholding tax, they are attractive to long-term investors.
There are no minimum or maximum limits for preferred funds, but each private pension participant may hold assets in only one fund at a time. Fund management primarily involves setting limits and strategies according to participants’ risk-return expectations. Each participant has the right to change funds, but fund changes are limited to a maximum of six times per year. Funds themselves are classified by risk level—low, medium, or high. Low-risk funds offer steady, modest returns with minimal chance of loss. High-risk funds offer the potential for higher returns but carry a greater chance of loss. To select and manage funds, members can work with fund specialists provided by their private pension provider and make changes within the annual allowance.