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Pensions Plan |
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 Pension Plan: A pension is a steady income or a monthly payment given to a person upon retirement, in the form of a guaranteed annuity. Retirement Planning is a very important factor of life. It helps to make your retired life to be quiet, peaceful and secure according to senior citizen’s dream. Pension Plan is a powerful tool to provide future benefits after retirement. A pension plan is a method in which an employee transfers part of his current income stream toward retirement income. At retirement time there are two options to choose. First one is to take all of the cash accumulated in the permanent policy and receive monthly benefits. Second one is that take fixed amount from time to time.
There are two main types of pension plans:
1. Defined-benefit plans
2. Defined-contribution plans
In defined-benefit plan, the employer guarantees that the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool.
A defined-contribution plan the employer makes predefined contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance.
Benefits:
- It provides flexibility to transfer the funds in the later year in case of any mis happening.
- It Increases the retirement income and helps to one of the settlement options.
- There is no investment risk to participants
- It offers guaranteed retirement income security for people.
- Not Dependant on the participant's ability to save
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