Friday, February 22, 2013

Advantages Of Pension Funds Today

By Lucy Wathen


It is a plan that is undertaken by the employer. The plan is self sponsored and is aimed at enabling the employee to live a good life even after he stops working. The employee is assured of income after the many years of toil. Many term it to be a pool of cash. Anyone who would like to have a good life after employment can never go wrong with pension funds. Though, those who are self- employed may find it hard or rather impossible to join the scheme.

Many companies prefer to get an intermediary who takes money contributed. It then invests it and manages it. This is mainly a financial institution. Once the person retires, this money is given to him. The large corporation may however prefer to manage them on their own.

There are two major types of the plans. They are defined-contribution plan and the defined-benefit plan. The defined- contribution is the most common in the society of today. The contribution of the employee is invested and upon retirement, its payment is done according to how the investment proceeds. This means that one cannot be certain on the amount of money that he will get after retiring.

Those who take the defined-benefit are certain on the money they receive in the end of it all. They have a fixed income sum. The money paid is not dependent on the profit generated but is totally unaffected.

There are two major ways through which one can receive the payments. It may be by the regular or the lump sum payments. Deciding to take up the lump sum means that one receives all, the money at once. Whereas, according to the regular payments, one receives the money monthly for certain duration. Many do not prefer this way. The decision is left to the employee to decide.

Therefore, its essentially to take pension funds. They are a good way of saving for the future. If one has not thought of that, it is not too late.




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