To earn a reasonable income and lead a comfortable life,
Retirement Pension Plans are basically a financial assurance that a person will
continue, even when he retires from work. The popularity and trend of opting
for Retirement Plans is gaining strength.
In fact, in order to increase their
future financial security, many people from the government services sector in
India are choosing secure pensions after retirement and this is the reason a
retirement pension plans are gaining popularity.
Nowadays, there are several reasons for these retirement
pension plan becoming popular-
Cultural and Social
Paradigm Shift
The joint family system is crumbling slowly and gradually.
Nuclear families are becoming more and more popular and parents are
increasingly under pressure to provide for their own income after retirement.
Secondly, to have an independent income in their old age is preferred by the
older generation itself as they are more independent minded, and they do not
wish to depend upon their children for financial survival.
Rising Costs of
Living
In the olden days, after retirement, people could survive on
a minimum expense but now they need retirement pension plans to stay
comfortably and maintain a good standard of living. Since in modern times, the
costs of living has gone up very high, it is essential to have solid financial
backup in case of any emergencies. In older age, the costs of medical care are
high and in most cases, insurance cannot cover the entire cost of care.
Therefore, for a reasonable survival after retirement the retirees are
increasingly looking at creating a sufficient post-retirement income.
Longer span of life
The average span of life in India has gone up because of
improved health care facilities and medical advancements. As a result, the
length of post-retirement life has gone up. This is encouraging more and more
people to plan for a consistent income after retirement that can support them
throughout their retired life.
Variety of retirement
pension plans
Both in the private and public sectors, there are many
different retirement
pension plan and schemes. But essentially, there are four types of
retirement plans.
Guaranteed Period Annuity: In these plans, for a minimum
number of years, the person is guaranteed a specific income. The nominees will
continue to receive that income till the period is completed if the person dies
before that period. He or she can continue to receive the income till his death
if the person outlives that period.
Life Annuity Plans: Till the time the person continues to
live these plans guarantee a person a specific amount of income. The originally
invested amount is refunded to the beneficiary’s nominee after the person’s
death.
Annuity Certain: Under this retirement pension plan, for a
fixed number of years a fixed amount of income is paid. Even if the retiree is
still living at the expiry of this period the payments will stop at the end of
the period.
Deferred Annuity: Under this plan, to create a corpus fund
for a number of years, the person first saves from his income. Thereafter,
giving an assured income for the retiree till he or she lives as that fund is
used for investing in a specific retirement plan.
[Source: http://blogs.siliconindia.com/johnmark12/Significance_of_Retirement_Pension_Plans-bid-1I8lvaCs87910146.html]
