Pension Planning For Retirement !

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Retirement Pension Plan
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Pension Planning For Retirement !
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According to a survey in United Kingdom, more
than 50 of people do not save enough for their
retirement plans. The number is worse for
Americans and Canadians. 150 million Americans
out of 200 million, who are in working age, are
not saving enough to fund their needs after
retirement. Similarly, 80 of Canadians will
not have a comfortable life after retirement.
Countries like America, UK, and Canada offer many
benefits for old age people in terms of social
security. However, this amount is small and
doesnt guarantee a good life. The situation in
India is worse because there is absolutely no
social security for a large mass of people. With
increasing prices and longevity, the need for
sufficient corpus is of paramount importance.
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Retirement Pension Plan is a scheme where people
invest in order to withdraw a specified sum of
money periodically after they retire. They can
also withdraw in lump sum amount but this is not
advisable. People invest in many instruments for
their future requirements. These instruments
differ in returns and structure of
products. Employee provident fund (EPF) EPF
is a scheme which allows employees to contribute
certain part of their income for their provident
fund. The advantage of this scheme is that the
employer contributes equal amount. EPF is the
most widely used pension plan. This gives 8.6
returns on the savings. Investors should keep an
eye on EPF rate as it keeps changing.
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At the same time, the interest earned on it is
not taxable. Nowadays, individuals also get
annual statement from their company which helps
them plan better for post-retirement
needs. Public Provident Fund (PPF) PPF is
another pension scheme, which allows individuals
to save a certain amount. The return is 8.8 and
the tenure is 15 years. Please keep an eye on
the rate as it keeps changing. Due to the
flexibility that PPF offers, it has become a very
popular instrument for employees to plan for
their retirement. Individuals can save Rs 500 to
Rs 1,00,000 every year. It is offered by many
banks and post offices. Since the interest rate
is known, individuals know how much they are
going to receive at the end of the tenure.
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• If individuals want to extend the tenure, they
  can do it in a slab of 5 years.
• There are other savings scheme by Government and
  banks that are also used by individuals for their
  Retirement Pension Plan.
• Pension funds
• Pension funds are mutual funds offered by fund
  companies. These funds are mainly of three types
  aggressive funds, balanced funds, and
  conservative funds. Aggressive funds invest major
  part of their fund in equity.
• Balanced funds invest a part of fund in equity
  while conservative funds invest almost all in
  debt securities. Needless to say, Equity funds
  are the most risky of them. Balanced funds are
  risky compared to conservative funds because of
  equity exposure.

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However, looking at the time horizon of
individuals, equity funds and balanced funds can
give better returns over long term. Conservative
funds are less risky and hence give low returns.
In general, equity funds can give 12 to 18
balanced funds can give 10 to 15 while
conservative funds can provide 7 to 10 returns
over long term. There are other mutual funds
which offer the same. The funds mentioned here
also offer different variants. The variants can
be aggressive plan or conservative plan depending
on exposure to equity. The variants can also be
dividend or growth depending on payment structure
of the fund. Unit Linked Pension Plan There
are pension plans which are linked to the market.
These plans expose investors to higher risk but
the return will also be high in longer term.
However, investors must be careful in choosing
the unit linked pension plan.
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Important points The pension funds, while
offering a great way to plan your retirement,
also penalize you hard if you redeem it before
time. Most of the funds do not charge you
anything if you redeem after 5 years. However,
they may charge as high as 3 to 5 if you redeem
within 3 years. There are other opinions on
retirement fund planning such as buying good,
performing mutual funds and take term
insurance at the same time. This can also be a
very effective tool for retirement planning but
investors need little more knowledge to form an
effective portfolio. Finally, investors must
separate insurance and investment for retirement.
Source https//blog.bankbazaar.com/pension-pla
nning-for-retirement/
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