Pension Plan continued…

Please the earlier part for continuity.

If your first time reader, you can go through all the articles for better understanding of the advantages of the Govt service and the various facilities offered therein like GPF, PENSION etc. and other associated benefits. These blog has been created to help the govt servant especially in R&D institution to take the informed decision before they take the plunge into the private sector by the lure of money .Many are unaware of the benefits available in these organization and their hasty decision should not cost their life and opportunity.

In continuance of the benefits ,we saw an illustration of pension available to Govt servant and vis a vis comparison to a pension plan offered by the insurance companies.

The pension benefit is not available to those who joined on or after 01.01.2004 and Govt of India had implemented the new contributory pension scheme to all new recruits. We will concentrate our discussion on those who are under pension scheme and as seen in the earlier example the basic pay will rise correspondingly according to one's rise in the organization and with the new assessment schemes provide for promotional avenues for next 2 grades within a career span of 8 or 9 years. Hence those who have reached scales of 10000-325-15200, 12000-375-16500 etc. should understand the pension benefits properly.
As per the earlier example One has to contribute approximately Rs.17000 per month to earn the pension to get as is earned by a Govt servant and these elements has to be added to one's pay to have a correct comparison.
However the schemes offered by the private insurance companies called ULIP pension plans are based on the stock market. The returns shown by them are not guaranteed and the benefit are variable with return based on the future performance of the fund . Hence if you read any of such plan details it will mention that the return shown are illustration only and should not be construed as a guaranteed return and the investment risk has to be borne by the investor.
Hence one is not sure how much he will get at the end since no one will be able to predict the market and if the expected returns are lower you may not get the amount equal to the Govt servant pension.
Apart from the above, no one will provide free service and the fees and administrative charges in the schemes are very high and they will collect their charges within first 5 years so that they do not lose anything. Hence their charges are deducted first from the premium and the balance only is invested.
If we calculate the charges some time it may equal one year premium. Even after paying such huge amount as premium charges ,the returns are not guaranteed and one has to undergo that risk associated with such investment and there is no other option available to private sector except to go for such plans hoping everything will go on well.
Compare this with the situation of Govt servant, wherein he has no worry about the market or anything and he is sure to get his pension.