Pension - An Introduction

Many people in this world, especially younger people who are far away from retirement fail to see the benefit associated with pension. For them their new car or next holiday is more important than their retirement thoughts. For these people the word pension conjures up images of walking sticks and old age pensioners. With soaring prices of everyday commodities, people are finding it difficult to save money for some unforeseen circumstances let alone investing money in pension plans.

Pension is paid to you on a regular basis; the amount of it however depends upon amount of money that you have saved for it and the time for which you have saved the money.

To have a comfortable retirement, pension is the key. It has become very important to plan for your employment. There are various reasons for it like increase in number of working people over 50 years, improved medical and health facilities that have increased the lifespan etc.

To kick-start your pension planning process all you have to do is to join the pension scheme of you company. Try to pay as much as you can. You will not have to pay anything actually; the contributions that you will make to the pension scheme will be deducted from your salary and it will be subjected to tax relief. Generally, the company's pension schemes are good having desirable benefit levels, which you will not generally find in the personal plans. It's not all; if you are lucky then your employer may give some contribution to your pension plan.

However, if you shift your jobs frequently or you are self-employed then you should avoid going for company's pension scheme instead you should start a personal pension plan. This will allow you to contribute regularly to the plan no matter where you are working.

There are mainly two types of company's pension. One is the non-contributory company pension and the other is the contributory company pension. In the former, the company itself contributes the payment towards the scheme on behalf of the employee whereas in latter, the contribution is taken out from the salary of the staff member automatically.

Nowadays many countries have created social or state pension funds for their citizens to provide them income when they retire from their jobs.

Unfortunately, with each passing day you get closer to your retirement, now you can also not solely rely on just the state pension schemes. If you rely on only the state pension schemes for retirement then you will not be able to enjoy the luxuries of life. If you really want to retire comfortably and have a relaxed life then you start contributing to the pension schemes. Here it is very important to see that the pension plans that you are going to choose should be appropriate for you. The pension scheme should take into account your current situation as well as your future needs.

It is always better to set your retirement planning target. Before you choose your pension plan, you should estimate that how much money you would need to maintain your lifestyle once you are retired from your job. Also, you must try to convert at least seventy per cent of your pension funds to income. To do this, you should buy an annuity. Annuity will ensure regular income for life. The remaining thirty per cent of your pension funds can be can be taken as tax-free lump sum.

You can also increase your income with other investments buying shares, saving amount on an individual savings account, saving in bonds etc.

Anzer

Article Source: http://EzineArticles.com/?expert=Anzer_Khan