Reverse Mortgage

Please read the earlier parts for continuity.

The element of pension in retirement planning is significant. This pension element is not correctly understood properly and considering the raising life expectancy of Indian population, we can assume that by average the employee will live up to the age of 75 years and adding another 10 years for spouse the monetary support is provided by the Govt for another 25 years without any contribution.
This pension benefit is not reflected in the Govt. employees pay roll and if we calculate the contribution one has to make to get the assured return in one's retired life the CTC of the Govt employees swell and it may be more than what is offered in private sector.
The benefit of pension is not available to MNC companies and to earn the pension one has to contribute from his pocket and this cost has to be added to the benefit to arrive at the correct picture.

Whether this aspect has been correctly looked into or properly explained to the leaving employees of these R& D organization?
Whether the leaving employees are aware of these hidden benefits?

If you refer the earlier part, we made some assumption on the likely pay scales of the Govt employee after 30 years or so with the condition that no increment, no promotion is given to him. The basic pension receivable by him will be Rs.1.75 lakhs per month. To equate this element we need to work out what will be the premium payable by an employee who do not get pension.

The pension plans offered by various insurance companies will give the idea about the monthly premium payable ? The financial security in the form of monthly payments to support one's self and to have respectful life without anybody's support is important and many people are deprived of these benefits and struggling in their late life.

Govt of India has realized the plight of such senior citizens and announced "Reverse Mortgage scheme" in the budget 2007-08.

This scheme allows the senior citizens more than the age of 60 years to mortgage their owned houses to bank and receive monthly payments in the form of loan till their lifetime. They can continue to stay in the mortgaged house till their life time and need not to pay their loan back. After their death, their family members can pay back the loan and get back the house otherwise the banks will sell the house and recover the loan amount. They have the option of drawing the payments either quarterly or monthly as per their liking.

This scheme is welcome step in providing a support to struggling senior citizens and they can spend their life peacefully. In pursuant to the budget announcement, State Bank of India has introduced this scheme from 12^th Oct 2007 and all senior citizens where the husband and wife are more than 58 years of age can avail this facility.

These scheme is one such step in providing support to old age people who do not have pension. This also explains the plight of many senior citizens in the country who are suffering without adequate support.

We will discuss further and calculate the premium payable to have a pension/annuity.