What is the need for a pension plan when we can save money in fixed deposits and get returns?
Pension plans lead to long-term wealth creation and encourage dedicated saving for the retirement years
What is the need for a pension plan when we can save money in fixed deposits and get returns?
Rakesh Singh, Lucknow
Pension plans lead to long-term wealth creation and encourage dedicated saving for the retirement years. While there is a continuous stream of income during a person’s earning years, all that he has after retirement is his savings corpus. A major portion of saving done by an individual in his youth goes towards the education and marriage expenses of his children. The savings corpus should be large enough to provide for all these expenses and still give a fixed return post-retirement. Saving for old age requires a lot of financial discipline. One has to not only provide for the years after retirement, but also create provisions for the increased cost of living and the high medical expenses of old age. A pension plan ensures a fixed sum of income post-retirement. Saving for the retirement corpus through a pension plan should start at a young age. Annuities are provided out of this corpus after retirement.