Why pension plans are important

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Calculator Redundancy pay calculator. Why save into a pension? The advantages of saving into a pension. Why are pensions important? Did you know? If you fall into this category, you have three choices. Need more information on pensions? Our help is impartial and free to use, whether that's online or over the phone. Back to top. Pensions have many important advantages that will make your savings grow quicker.

Find out more about tax relief in our guide Tax relief and your pension. Generally, you can access the money in your pension pot from the age of How tax relief can help build up your pension pot. When your income is over a certain level, the government takes tax from your earnings. Find out more in our guide Tax relief and your pension. Extra money from your employer. Find out more in our guide Automatic enrolment — an introduction.

A tax-free lump sum when you retire. Find out more in our guide Options for using your defined contribution pension pot. Was this information useful? Yes No. Thank you for your feedback. Share this article. Email Facebook Twitter. More options.

Share this with. WhatsApp LinkedIn. Explore this topic Close Pensions basics. Starting a pension What is a pension scheme? The different pensions you can get if you live and work in the UK Workplace pensions Choosing a pension yourself Pension savings timeline. Explore this topic Close Starting a pension What is a pension scheme? Talk to us live Talk to us live for…. Talk to us live for… Pensions guidance. Talk to us live for… Money guidance.

Talk to us live for…. Talk to us live for pensions guidance using. Online form. At the same time, you may also want to maintain your day-to-day lifestyle without worrying about expenses.

By planning in advance, you can define the path to achieve these life goals without any financial dependence. Here is how retirement planning can help you:. You want your current lifestyle to continue even after retirement. Today, these expenses are covered by your monthly income. After retirement, you can plan to get a regular income to cover your daily expenses.

You may need to save a lot more for your post-retirement expenses since the average life expectancy is higher today By planning in advance, you can make all the arrangements for a longer post-retirement income. You would not want to depend on anyone in case of any financial emergencies or medical expenses. With the right retirement plan, you can build an emergency fund that will keep you prepared for unexpected events.

Every retirement is a new lease of life. You may also continue to have commitments to fulfil like sending your child abroad for higher studies.

With the right retirement plan, you can secure all these dreams. In India, the prices of consumer goods grew 6. This can affect your standard of living. By planning for retirement, you can invest in advance and grow your money to beat inflation. You have worked hard to build a life of comfort for your family. You want to ensure this comfort lasts for years to come, even in your absence.

When you plan for your retirement and build your retirement savings, you can plan to leave wealth behind for your family too. After retirement, you can plan for a regular income to cover your daily expenses.

We have created a step-by-step guide that can help you plan your retirement. The first step of retirement planning is to answer the question: At what age would you like to retire? You may want to retire at the age of 60, or you may want to plan for an early retirement. The time you have until retirement can affect a lot of your decisions. For example, if you are 15 years away from retirement, you can choose to invest smaller amounts every month.

You can also afford to take a more aggressive approach towards investing. In contrast, if you are years away from retirement, you may need to invest a large amount in safer options. You may also want to consider factors like pending loans, current savings, ability to take workload or stress, among others.

You may want to live a simple life, or you may have large dreams like starting a new venture or taking up new hobbies. Your post-retirement lifestyle can dictate how much you may spend on a daily or monthly basis.

These are just some of the factors you can consider to understand your ideal retirement lifestyle. Your monthly expenses today may or may not continue post retirement. But if they are likely to graduate before you retire, those expenses may not continue.

You may also have lifestyle-related expenses - some of which may continue even after retirement. For example, utility bills like electricity and internet are likely to continue. This is why you may want to go through your current expenses and identify which ones are likely to continue post retirement.

You may want to buy a vacation home to enjoy your post-retirement years. You may also want to take your spouse on a cruise or explore a new country every year. You need to estimate the cost of these goals that you plan to fulfil during retirement. There can be unexpected circumstances like medical emergencies or accidents. Such situations can create a financial strain after retirement. By building your retirement savings, you can build a cushion that can minimise the impact of such unfortunate events.

By now, you may have a clear picture of your retirement lifestyle and goals. The next step involves listing these down and assigning an amount for each goal or expense. For example, you can make a list like below:. Note: These numbers are just indicative in nature. You will also need to factor in the impact of inflation on this amount. You may have saved regularly over the years. Your workplace may have also contributed regularly to an Employee Pension Fund.

You should take stock of all your investments to date. Next, estimate how much these investments may grow until your retirement. This can give you a good idea about how much you may need to invest further. You may want to invest a certain amount every month towards your retirement savings. The amount of money you invest can have a big impact. This money can grow over the years and add a lot more value to your retirement savings. Once you decide how much you plan to invest, you can find out the estimated value of your retirement savings.

You can compare this amount with your estimated cost of retirement. This can help you identify any gaps and make necessary changes to your plan.

Every investment option has a different way of earning returns. Some options, like equity, have a higher potential of earning returns, but they come at the cost of higher risks. Other options, like debt or fixed-income investments, offer a safer approach but may earn lower returns.

You can also choose a mix of equity and debt to grow your money. The last step of retirement planning is about deciding your income after retirement. You may plan your investments such that they mature on the day you retire and give you a lump sum amount.

You can also plan in such a way that when you retire, your investments give you a lifelong regular income. You can also invest your lump sum in an annuity plan and get lifelong regular income every month, quarter, six months or year.

Many investment options can help you save for retirement. Some options may attract higher risks; others may help you protect your wealth. We understand that growing your money safely is important. This is why we have designed retirement plans that suit your needs. Some of these plans offer you the potential to grow your money.

There are also plans designed to ensure a guaranteed 1 regular income for life. Depending on your requirements, you can select from these two types of retirement plans:. These plans help you grow your money over the years before retirement. With these plans, you can invest regularly over a period of time and build your retirement fund. These plans also provide a life cover 11 to protect your loved ones.

Typically, you select such plans when you want to grow your money in a safe manner and are planning for retirement well in advance. These plans help you get regular, guaranteed 1 income throughout your life. You have the power to decide when you want to start getting your regular income. We have discussed what an annuity pension plan is and its importance in a person's life. We have seen the benefits of a pension plan in different dimensions.

This would have provided insight towards the practice for saving money for the retirement corpus. There are many ways to invest in pension plans. We have seen the most prominent ones in the market.

Now, it is time to take the necessary steps to plan for your retirement life by incorporating the appropriate pension plan for you! Start exploring! Why Pension Plan is Essential for You? What is an annuity pension plan? Why is a pension plan essential? Daily expenses - Daily expenses and utility bills such as electricity, water, telecommunication have to be met even after retirement.

These are essential commitments that you need to fulfil. Short term financial commitments - There are possibilities that you come across specific repairs of home appliances or your vehicle. You cannot delay such expenses when you are in desperate need of them. Also, there are special occasions such as festivals or a family function for which you are obliged to attend and contribute. Medical expenses - As you start ageing, there are regular medical check-ups, medicine costs that keep recurring.

Pre-existing ailments can increase and will require adequate attention that will definitely cost more. Debt management - If you are the only earning member in your family, there is a possibility of having debts. It can be for purchasing a house, car or children education. An annuity plan can support you by managing these debts and pay them off regularly after retirement.

Family obligations - Every individual will plan and complete all the financial responsibilities before retirement like children education, marriage etc. However, the responsibilities do not end there. You will be expected to provide financial support to your children and other family members when in need.