A Pension Plan is a kind of retirement plan through which you can secure your worker’s future. An employer is required to make regular contributions in order to create a pool of funds that can be given to the worker after his/her retirement. The contributions are periodically invested in productive ventures so as to make profits out of it.
A pension Plan also gives an opportunity to the workers to contribute some of their income. Pension plans play a dual role in investment as well as insurance cover aspects. In simpler words, your regular contributions out of your income/wages will accumulate and help you in your future.
Who can purchase a pension plan?
Every earning individual must purchase in pension plans so as to secure their after-retirement life. Pension Plans help in overcoming financial instability during our post-retirement life.
Because of Section 80C of the Income Tax Act, 1961, you can get tax deductions with respect to Pension Plans.
Tips to remember before purchasing a pension plan.
It is very essential to choose an effective pension plan so as to get an adequate amount of money that would be sufficient enough to secure yours after retirement life. These are some of the tips which you must not forget before purchasing a Pension Plan:
- It is very essential to estimate your financial goals before purchasing a Pension Plan.
- The Pension Plan you are opting for must comply with your present income.
- Go through the plans with utmost care and accuracy. Read the details of the plans carefully and also have a proper glance at the terms and conditions.
- It is not recommended to buy a Pension Plan only for tax deduction purposes.
Benefits of pension plans
- Guaranteed Accumulated Amount:
Pension Plans are famous since they provide the very means of living independently after retiring. It is recommended to take the help of a retirement calculator so as to determine the amount which you will get after retirement.
- Liquidity: These plans also provide your chances of withdrawal. You need not rely on taking loans from financial institutions and banks.
- Vesting Age: It is an age where the person insured gets the benefit of monthly pensions. The minimum vesting age is of 45years. However, it is compatible up to the age of 70 years.
- Accumulation Period: It is upon the investor to choose how he wants to pay the premium. In simpler words, the investor can pay the premiums periodically or in a lump sum. If you start investing for 35 years of age and continue till 65years. Then, the accumulation period will be 30 years. The amount would be sufficient enough for a happy living.
Conclusion
Earlier Pension Plans were not that much in demand. However, with the rapid advancements in the field of education, the general public is getting aware of the benefits of such plans. Nobody knows what the future circumstances turn out to be. Therefore, it is very important to purchase a pension plan.