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How to Get a Pension Plan

How to Get a Pension Plan

What is a Pension Plan?

Pension is the guaranteed retirement income which is provided by an employer to an employee who is qualified for this benefit. Pension benefits can also increase with the addition of years of employment with that employer. The pension plan is also called retirement plans because they are future retirement benefits that a person receives. A pension plan helps and supports you and your family after you complete your service years. 

The pension plan is divided in two stages- 

Accumulation stage is the first stage, where you can invest in a pension plan during your service period until your retirement age. 

Vesting Stage is the second stage, in this stage you start receiving annuities until death i.e. the amount you invested in your service years. 

Employee’s Pension

Nowadays every job provides pension after a certain period, which means where an employee has to work long enough for eligibility for the pension benefits.

Many jobs in the government sector at both federal and state-level offer pension benefits to its employees.

In the private sector, big companies also give the benefits of pension, the employee has to ask the employer if they need pension benefits and what is the eligibility criteria for pension benefits.

401 (k) plan is a retirement account offered by the employers to the employees wherein the employees can contribute in the 401 (k) plan. It is necessary to note that 401(k) benefits are not the same as pension according to 401(k) a person has to contribute own money to the plan, and an employer also makes a contribution in matching. 

Create Own Pension Plan/ Retirement Plan 

When the person is not doing any job in the private sector or government sector which mean he/she is self-earning (like business) or self-employed, then, in this case, the person can create their pension by any scheme which has been provided by the government. You can save money while doing regular business but these pension schemes have age limit the person needs to pay a particular amount on monthly basis for few years and after the completion of age limit the person will get the amount in the form of pension in the bank account, in India, there are many schemes provided by the bank which guaranteed income for the rest of life. 

For example- Raju has taken the pension scheme of X company, the (X company maturity period is 20-40age) so Raju will pay the fixed amount for 20 years and after attaining the age 41 the company will provide pension amount to Raju. 

Pension for Spouse

While choosing a pension one must be considered their pension is only valeted for there life or it is valeted afterlife which mean the pension will be given to there spouse, therefore it means that the pension will pay the benefit in a joint or survivor option which can be guaranteed to pay the amount as long as the either of spouse lives.

Benefits Pension Plan 

Tax benefits

  • New age retirement products – there are tax-free income upon retirement for life, tax-free fund value withdrawal, tax exemption on the amount invested under section 80C state up to 1.5 lacs 
  • Regular pensions plan – there will be no tax-free income upon retirement for life and tax-free fund value withdrawal but there will be tax exemption on the amount invested under section 80C up to 1.5 lacs 
  • National pension scheme- there will no tax-free income upon retirement for life but there the tax-free fund value withdrawal and tax exemption on the amount invested under section 80CCD(1B) up to 50K will be given.
  • Public provident fund- there no tax-free income upon retirement for life given but the tax-free fund value withdrawal and tax exemption on the amount invested under section 80C up to 1.5 lacs will be given.

Flexibility 

  • New age retirement products – In this flexibility to fully withdraw fund value anytime, flexibility to increases, decreases pension, and choice of multiple investment strategies to maximize returns will be given. 
  • Regular pensions plan – no benefits will be given.
  • National pension scheme – the only choice of multiple investment strategies to maximize returns will e gave.
  • Public provident fund – no benefits will be given.

Best Pension Plans

Pension scheme provided by the private bank 

  • Max life insurance (maturity – 46-90 year)
  • Life insurance corporation of India (maturity- 31-80 year)
  • SBI life insurance (maturity – 40-70 year)
  • HDFC life insurance (maturity – 45-75year)

Pension scheme provided by the government 

  • PMSYMDY( Pradhan Mantri Shram Yogi Maan-Dhan Yojana- Rs 72000 per year this scheme available to 18-40 year people only and the pension is assured after attaining the age of 60 years.

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Written by Saakshi Gupta

Saakshi Gupta is a BBA LLB student at the Fairfield Institute of Management and Technology (GGSIPU), New Delhi. Her passion for law and business brought her to pursue law. She has a keen interest in business law, environmental law and also wants to explore more in the field of law. Apart from legal academia, she is a volunteer at a govt. program (National Service Scheme).

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