Have you ever thought of how hard you have been working all your life? Have you ever had that moment, wherein you realize you deserve to enjoy everything for which you worked very hard? Well, you are one of the millions of dedicated employees who need to kick off their shoes at retirement age. There is nothing better than to look forward to stress-free, relaxed living.
To achieve that kind of life, you have to prepare for it. A pension fund is what you need. This is a fund accumulated through contributions from an employee, the employer, or both. Ultimately, the employee’s pension comes from this fund.
What is a Pension Fund? How is it Different from a Provident Fund?
Once a contributor to a pension fund retires, the person get a third of the fund in a lump sum (cash). The contributor receives the rest of the fund as pension. On the other hand, a provident fund contributor receives the entire benefit in a lump sum (cash).
Both pension and provident funds are taken from contributions of employees and employers. Some cases involve contributions from employers only. The funds accumulate interest. A bit of money goes out to support expenses in running the funds and in paying for the benefits.
Below are the benefits from pension and provident funds:
Insured benefit – the benefits given to the dependents of an employee, who died or to a disabled employee.
Retrenchment benefit – the benefits retrenched workers receive.
Withdrawal benefit—the benefits dismissed or resigned workers receive.
Retirement benefit – the benefits retired workers receive.
It is true that you need to stop working at a certain age in your life. You may choose to retire at an earlier age, while others choose to work for as long as they can. Working people usually retire at 55, 60, or 65 years of age. The retiring age usually depends on the company’s policy.
Once you retire from your regular work, your pension fund becomes your income. You have the choice of drawing it from your private pension or from your state pension.
A full-time employee can gain access to the company’s provident or pension fund. A casual employee cannot. If you are a self-employed individual, you have to build up your provident or pension fund on your own.
Retirement is easier when you have a sufficient pension fund. With it, you can continue to live your life, even if you are not constantly working. Check out your company policy when it comes to this type of fund. This way, you can be confident in facing life on your retirement day.