THE GOVERNMENT WILL MAKE A BIG ANNOUNCEMENT FOR PEOPLE WHO HAVE DIGITAL PAYMENTS

Education is an important medium of acquiring skills and knowledge. Our education begins at home. Thereafter, as we grow we go to schools, colleges and other educational institutes.

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Pension plan is all about securing a financially-secured lifestyle in the oldage. During the young age, people normally tend to be positive and they do not feel the need of retirement planning. But is that the right approach? Here are the four reasons you must consider pension plans.

Dignified Retirement: A penny saved today will become a hefty amount after a period, let’s say 20-30 years. Retirement planning should start when you are in your 30s. If you start in this age and save at least 10-15 per cent of your total income every month, then you will be able to collect a sum which shall provide you a dignified retirement.

If you start in your 40s, then you will be required to save more and that may put a strain on your budgets. You may also have to compromise on your lifestyle and you may not like to do it. Therefore, it is better that you start early and save a certain portion of your income for investment in pension plan. By the time you retire at an age of let’s say 60-65 years, you will have an amount with which you can spend a respectful lifestyle.

Power of Compounding: As we just discussed that it is better to start early when it comes to pension plans. The reason being that it provides you the power of compounding. You may be saving less but if you are doing it for a larger period of time, then the same amount will grow in multiples.

When your investment reaches vesting age, that is the period after which you receive your returns, you will be able to get a decent size corpus in hand.

Pension plans provide returns in two ways. You may opt for a one time return so that you get a large corpus after a stipulated period of time. Otherwise, you could go with a monthly pension plan. Under this, you will get pension every month. This is just like a pension a government employee receives.   

Compulsory Savings: Since pension plans require regular investments, you will be automatically compelled to invest a certain amount of money in set frequency. This way, you slowly get into the discipline of investing. This discipline really helps in developing a sizeable corpus for the future.

When you are young and financially capable, you may not realise the importance of savings and tend to spend on making yours and your family’s lifestyle better and better. That is fine but you must save for the rainy day. Pension plans help you just do that.

Tax Exemption: There are pension plans which are eligible for exemption under the Income Tax Act. Thus you can claim exemption in your Income Tax Return (ITR) every year and save on tax. That will also be a sort of saving for you, indirectly.