Home Insurance Other Insurances What is a pension plan ? Retirement plan

What is a pension plan ? Retirement plan

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You toil and work hard your entire life to provide you family and loved ones the comfort and all the good things that life has to offer. But all good things are ephemeral so is your age full of vigour and strength, as you age your vitality and income ebb. Would you not like to ensure that the lifestyle you once lived it shall continue even after you have retired?

Pension Plans foresees into your future and financial requirement in your old age. Pension plans are individual plans mostly suited for senior citizens. Pension plans are a must for securing your future so that you never give up on the things that you want most.

What Pension Plan do?

Life Insurance Policies offers various Pension and Retirement Plans which helps you to effectively plan your retirement and provides you with the regular income in your old age. Pension plans are different from life insurance policies that are taken to cover the risk that may arise due to happening of an uncertain event.

Pension Plans helps you build an adequate corpus that will generate a complacent regular income once your salary stops. Pension plans come with an attractive combination of equity participation and a capital guarantee comfort.

How Pension Plan Works

At the policy inception, you need to choose your premium and policy terms. This phase is the accumulation phase and up to 50% of the investments will be in the equity and equity related securities.  This fund invests in debts and money markets. Pension Plans have both positive and negative aspects. When you work with the government you are left with little choice to exercise your discretion as to the type of the retirement plan you want.

BENEFITS

  1. Helps in building your retirement corpus in accordance with your risk appetite.
  2. Assured benefit: protects your savings from market fluctuations and turn them into an assured return.
  3. At retirement you are given an option to choose from the available annuity options as per your needs and requirements and get a steady income.
  4. You can invest any amount of money in this policy.
  5. Avail tax benefits on premiums paid and receive tax-free lump sum as per the prevailing tax laws in the country.

Flaws in Pension Plans

Pension Plans invests Major portion of the premium money in government securities and bonds and therefore the returns on them are quite low. There is another reason for the pension plans not being very popular are that they provide tax benefits only up to Rs. 10,000.

In the Nutshell

It is very important to understand the specific details related to your retirement plans. Putting simply, Pension and Retirement Plans helps you in securing your financial stability when your financial income recedes. Given the high cost of living and increasing inflation retirement plans is the need of the hour as they will help you in living your life with vanity without compromising on your way of life or lifestyle.

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8 COMMENTS

  1. A pension plan is a way of peeping into your future and foreseeing your the financial stability of your post-retirement years. These policies are meant to provide senior citizens with a secured future so that they don’t have to give up on their habitual lifestyles after retirement. Hence, it is important to start planning for after-retirement years at an early age and to choose the best pension plan for your secured future.

  2. Regardless of the less returns or low tax benefits, its very important for one to invest in pension plans. At a certain age, your body gives up and refuses to work. And with the speed at which the lifestyle is blooming, it would be foolishness to depend on anyone, be it your own children or family. If you want to live with your head held high even after you have attained a certain age, start saving for it whilst you can. You might not have life filled with leisure but you will have a stable income to suffice your needs.

  3. Pension plans generally give returns with 8% interest rate. If you invest about 2k on a monthly basis and consider your retirement age to be around 60 years, and you pay lets say for around 30 years, then post retirement, you will earn approx 18-20k per month. The only question that needs to be asked before you invest in any pension plan is, “What will be the purchasing power of the monthly pension which I will earn?” What will be the real value of 18k after 30 years? For example, the salary of people in 1980s was around 500Rs per month. What is the earning power of 500Rs in 2015? So plan wisely!

  4. Securing your old age is very important. The prices of goods and services are ever increasing. Old age is a phase of dependency and you have to depend on someone else for money. Pension plan helps to take away this dependency and provides you with monthly income. Pension plans collect premium from your salary or profit in business to give you money after your retirement. However, it is very important to decide premium carefully and take into consideration the economic condition which might be after 25 to 30 years. If the premium is not planned properly, you will not get sufficient income after retirement.

  5. Even though there may be tax catches and all sorts of negatives, we all have to make a pan for retirement. A pension plan is the one that is most popular because it is easiest. At least some money is better than none – then you will not be completely dependent on others or the government for your income in old age.
    Another good idea is to get some kind of medical insurance for healthcare in old age.

  6. I was completely unaware of the pension plans and its advantages. From the post I could understand the same without any difficulties. It is a brilliant idea to have a pension plan when all your income sources are depleted at old age. The efforts taken by the author to explain everything in points is really appreciable.

  7. After years of toiling hard the body gives up and so does the income recedes. It is at this time when we start depending on our little ones for support. But why to be dependent when we can plan it in early life? A little planning before hand makes life after retirement even more beautiful. The only major flaw being the low rate of interest and inflation. But as the saying goes something is better than nothing.

  8. Great article, explaining things concerning all of us in order to understand what awaits us in the future – hopefully. This is an article that should have made visible for everyone. For younger and older people. Everybody would find some good information that can be used for future saving and living.

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