A pension plan is actually a plan that is offered to the employee after his /her retirement from which periodic payments are made to him for his benefit. There are certain factors on which the pension of an employee depends on such as for how many years he has served, his annual income earned during the job, retirement age, the position of the employee in the company, etc.
Pension plans are beneficial for those who are working in a company for a longer duration and are expecting some benefits. Who doesn’t want a source of income after retirement? Pension plans usually last for around ten years after retirement, but then again, it varies according to the company. Significant uses of pension plans are: One can avail tax-free funds on anything that he is paying for. As soon as a person starts investing in his pension savings, he can get better interest on the same. Say, for example, the compound interest on the investment will increase every year on the interest rate. Pension plans in India are easy to avail in case of emergencies where one doesn’t have to depend on the banks or other financial sources. Pension plans make you plan your future financial goals according to the pension value. Depending on the current income and benefits, you can choose your pension goal accordingly. In case a person dies before receiving the full pension plan, there are options that your spouse continues to receive the pension until it matures. This comes under the spouse option. Similarly, many such options make pension plans a good option. Things to take care of in Pension Plans in India There is a lack of access to pension plans as one isn’t allowed to access the amount unless he has turned 55. One should know his right to choose a plan which he can access according to his needs. See where your pension savings are being invested. If it is being invested in the wrong sources such as share markets, the returns can be very unfair to the individual. For those whose retirement is not near can manage, but those who rely completely on the pension plans will have a bad hit. See what the outcomes of the investment that you have made are. The returns have to be right for you, only then there’s a valid point of investing in a pension plan. Once you finalize a pension plan with a company, you have to move with it for at least ten years or more. There are fewer chances for flexibility. Hence, it becomes a challenge for some people to change their plan if it is not suiting them or if they are not able to access them during the time of need. Every pension plan has its pros and cons. The thing that can never be denied is that every individual wants to secure his/her future financially. There are goals such as marriage, rent, household expenses that are difficult to manage post-retirement. Hence, choose a plan that suits your requirements the best.
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April 2022
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