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pension scheme

About pension scheme

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What is pension scheme?

A pension scheme is a long-term savings plan that helps people save money for the future and it is a tax-efficient way to save money during your working life.
 
Over a period of 40-50 years, a pension scheme ensures an adequate corpus to deal with rising medical bills and expenses and a higher cost of living, driven by the country's inflation.
 
The amount of money saved into a pension scheme account is referred to as ‘contributions’. A pension scheme allows us to invest regular payments or transfer a lump sum amount into a pension fund account for retirement planning. When the policyholder dies, the entire pension amount is paid to the nominee or legal heir of the deceased.
 
People invest money under a pension scheme plan so that the fund accumulates over a certain period of time. That's why, the earlier we create a pension plan, the more time our retirement scheme will get to grow and the bigger the pension amount will be in the long run.
 

Tax benefits

Unlike a regular savings account, money invested under a pension scheme earns tax advantages. Pension schemes for retirement planning qualify for tax deductions under Section 80CCC of the Income Tax (I-T) Act, 1961.
 
In fact, you can avail of tax deductions up to a certain amount to buy a new pension policy or to make payments towards the renewal of an existing policy providing a periodical annuity or pension.
 
Under pension schemes, a certain amount is paid at maturity, which is exempted from tax and the rest amount is used to purchase an annuity. Annuity earnings are added to the taxable income and taxed according to your income tax slab. Also, no TDS (Tax Deducted at Source) is deducted on annuities.
 

How much to pay?

The amount you and your employer pay for your pension scheme may vary depending on which type of pension scheme you choose. However, by law, you and your employer have to pay a minimum amount into your pension scheme. Under a pension scheme, both employees and employers contribute to the scheme, and the greater the contribution, the greater the corpus.
 

Benefits of pension schemes

With pension plans, there are some benefits as mentioned below:
 

Guaranteed income

Under the ambit of a pension scheme, you get a fixed amount of income for your retirement planning. However, there is also an option to provide income to your spouse in case of your death.
 

Death benefit

Pension schemes also provide a death benefit plan for the financial security of your family in your absence. The nominee will receive the sum assured or death benefit after your death. However, if the pension fund scheme is discontinued due to some reason, the already accumulated amount in the policy will be given to the beneficiary.
 

Flexible premium payment terms

Depending upon your financial goal, there is also the flexibility to select the premium payment term plan.
 
A nominee has three options to use the pension funds:
 
— Buy an immediate annuity plan with the entire proceeds
— Withdraw the entire death benefit
— Partially withdraw the proceeds and use the balance amount to buy an annuity plan

Latest Updates on pension scheme

Following the DoPT order, the Department of animal husbandry and dairying had issued an order cautioning its employees of participating in the protests

Updated On: 23 Mar 2023 | 10:49 PM IST

Non-linked policies must be availed of by that deadline to earn tax-free return without cap

Updated On: 22 Mar 2023 | 9:37 PM IST

Reducing the time limit to February 28, 2024, the SC bench headed by CJI Chandrachud gave the schedule for payment of arrears to different groups of pensioners under the OROP scheme

Updated On: 20 Mar 2023 | 2:40 PM IST

"The old pension scheme is like accepting a post-dated cheque of a bank that is bound to fail"

Updated On: 05 Mar 2023 | 11:13 PM IST

The letter also highlighted "practical problems" being faced by the pensioners who are opting for higher pension options and said that the commissioner should take immediate action

Updated On: 04 Mar 2023 | 12:07 PM IST

This latest round is expected to be less disruptive that on previous occasions, with the Paris Metro working normally and most schools unaffected

Updated On: 16 Feb 2023 | 3:45 PM IST

Is retail inflation back to haunt us? What does Adani saga teach us about investor protection? Is it time to bet on new-age tech stocks? What is Andhra's Guaranteed Pension Scheme? All answers here

Updated On: 15 Feb 2023 | 8:00 AM IST

No revision in 25 yrs due to resistance from central trade union representatives, says coal minister

Updated On: 09 Feb 2023 | 9:51 AM IST

The economics and politics behind the old versus new pension scheme as elections loom

Updated On: 05 Feb 2023 | 11:51 PM IST

Halwa ceremony tomorrow will mark the final preparations

Updated On: 25 Jan 2023 | 11:03 PM IST

The number of enrolments in 2022 rose to 12.5 million from 9.2 million in 2021

Updated On: 22 Jan 2023 | 10:43 PM IST

He said the employees are an integral part of the state government and play an important role in taking the benefits of public welfare schemes run by the government to the last mile

Updated On: 19 Jan 2023 | 7:13 AM IST

Himachal Pradesh, Chhattisgarh, Rajasthan and Punjab have decided to roll out the old pension scheme

Updated On: 17 Jan 2023 | 10:22 AM IST

Taking to Twitter, Gandhi said the Congress had brought back the OPS in Rajasthan, Chhattisgarh and now Himachal Pradesh

Updated On: 15 Jan 2023 | 9:51 PM IST

The just over a month old Congress government in Himachal Pradesh on Friday fulfilled a key poll promise, with the Cabinet, at its first meeting, deciding to provide OPS to all government employees

Updated On: 13 Jan 2023 | 11:45 PM IST

Sanjeev Sanyal was responding to a question on some opposition-ruled states' decision to switch to Old Pension Scheme (OPS)

Updated On: 26 Dec 2022 | 11:03 PM IST

Pension of past pensioners would be re-fixed based on the average of minimum and maximum pension of defence forces retirees of the calendar year 2018 in the same rank with the same length of service

Updated On: 24 Dec 2022 | 3:00 PM IST

Maharashtra Deputy Chief Minister Devendra Fadnavis said the govt will not revert to the old pension scheme as it would put a burden of Rs 1.10 trn on the exchequer and lead to bankruptcy of the state

Updated On: 21 Dec 2022 | 2:24 PM IST

Gehlot called upon other states to revive the old pension scheme and also demanded a uniform policy for social security in the entire country

Updated On: 17 Dec 2022 | 7:52 PM IST

There is no proposal under the Central government's consideration to restore the old pension scheme, the Parliament was told on Monday

Updated On: 13 Dec 2022 | 8:00 AM IST