Should you invest in a pension scheme?

While we constantly grapple over meeting our current financial requirements, we must realize the importance of saving for the future. If you wish to maintain your existing lifestyle even after your retirement, you should take an early interest in locking in some money in a pension scheme. An annuity plan or pension plan is designed to offer you regular income after your retirement. Most people do not give importance to pension plans because it does not render immediate monetary benefits. They fail to understand that such plans will save them from the anxiety of retirement insecurities. A pension scheme is a powerful financial weapon that promises financial stability and security in your old age. Let’s take a look at some of the benefits of investing in a good pension plan.

• Long-term savings: Whether you choose to invest in a pension scheme through small regular installments or in a lump sum amount, retirements plans will assure you guaranteed long-term savings. Pension schemes create an annuity which can be further invested to generate a steady flow of cash during your retirement life.
• Tax exemption: One of the crucial benefits of investing in a pension scheme is that you can enjoy a tax benefit on your contributions. If you invest in a public services pension plan, your pension contributions will be taken from your salary before deducting tax. You will have to pay tax only on the remaining salary amount.
• Compound interest approach: It’s best to start investing in a pension scheme much earlier in your life in order to reap its maximum benefits. When you pool in money into a pension plan, you will make a return on the amount you invested. In the following year, you will earn benefits not only on the principal amount but also on the returns you made in the first year and so on. Therefore, the earlier you invest, the better the scope for building up a sizeable pension pot.
• Negate the effect of inflation: Another core benefit of pension schemes is that they are unaffected by the prevailing inflation rates. As a part of the plan, you will receive a lump sum amount at your retirement which will not exceed one-third of the corpus accumulated. The balance two-third portion of the corpus will be utilized to help you meet your recurring expenses in the form of steady cash flow.
• Insurance benefits: Certain pension plans come with the benefit of an insurance coverage. Such schemes offer you a lump sum amount on retirement or death, whichever occurs earlier. In this way your pension policy can be used to bolster the merits of a life insurance cover.

Over the years, India has seen a widespread break-up of the conventional joint-family system and a substantial increase in the nuclear family structure. This shift necessitates the importance of financial independence, especially during one’s golden years. A pension scheme serves as the perfect medium to facilitate this independence. However, the most efficient way to zero down on a pension plan is to make use of a pension plan calculator that will help you make the best choice as per your financial needs.