This Generation’s Jobs Won’t Come With A Pension. Here’s What You Should Do Instead

Jul 11, 2018 | 4 months ago | Read Time: 3 minutes | By iKnowledge Team

As Amelia Hill chillingly put it in her article in The Guardian, “We are entering the age of no retirement.” A main reasoning for this apocalyptic statement is the fact that this generation’s jobs won’t come with a pension. According to a report in Huffington Post Canada (1), 85 percent of the jobs in 2030 will be pension-less. Those below 50 years of age will definitely not see anything like the state and retirement benefits that their parents enjoyed. This is where a pension plan comes to the rescue. Beyond life insurance, living benefit plans are necessary to secure the retirement of the rapidly aging global population that is living longer than ever before.

What is a pension plan?

A popular description (2) of what is pension plan is as follows:

“A pension plan refers to the retirement amount, which an individual will receive from their chosen insurance companies on a regular basis or in the form of a lump sum post-retirement on fulfillment of premium payment term through regular investments. One can create a sizable corpus, which on maturity will give a regular monthly income for taking care of your post-employment years. This sum is called an annuity or a pension.”

A retirement plan or “a pension fund also called a superannuation fund in some countries, refers to any plan, fund, or scheme which provides retirement income.” This is a more general definition from Wikipedia (3)

While determining an adequate pension amount, you can follow the rule of thumb devised by financial planner Bill Bengen (4) in 1994 called the “4 percent rule.”  Basically, it states that one needs to save enough funds to be able to meet annual expenses in the first year of retirement by withdrawing 4 percent of their retirement corpus.

In the Indian context, if you aim to save a pension plan fund of Rs. 1 Crore, you will potentially have a post-retirement income of Rs. 4 Lakhs per annum.

Therefore, what a pension plan does is cushion the pension shock as described in the figure that follows. The pension plan also needs to keep pace with inflation to secure your retirement. Choosing your pension plan is crucial and hence refrain from blindly investing in the first private pension plan you come across. The answer to the question “what is pension plan” needs to address the fact that adequate flows of income are available to us for ten, fifteen, or twenty years post retirement.

Source: “Pension Shock,” Finance & Development June 2017 (Vol. 54, No. 2)

 Aegon Life Insurance offers pension plans that can help you build a corpus for your retirement and ensure a good quality of life. With their Insta Pension Plan one can receive immediate pension to take care of your needs.

The silver lining for younger workers is that retirement is still about four decades away, this provides them with time to plan for longer careers and to put money aside inpension plans.

However, for the younger working population, investing in pension plans should be part of their annual financial plan already.

What is a pension plan going to do for you then? By investing early in a pension plan, you end up saving for a longer period of your working life.

Source: “Pension Shock,” Finance & Development June 2017 (Vol. 54, No. 2)

The gig-economy, the rise of contract labor, consultancy, outsourcing, freelancing and casual labour feed into the growing pension-less job market. A robust personal pension plan can offset the post retirement insecurity. State benefits and even a traditional employer provided pension needs to be supplemented to ensure a dignified old age.

Adding to woes is the growing “solo retirement” phenomenon. The nuclearization of families and urbanization of lifestyles not to mention the migration and immigration angle makes retirement generally solo nowadays. The culture of the joint family that informally takes care of the dependents who have no salary is slowly unraveling. A good pension plan will cushion even a “solo retirement,” because financial security is the foundation on which a retirement rests on.

Adequate life insurance – That is as focused on living benefits as death benefits, a sound pension plan, solid savings and saving plans, wide and deep health insurance are all essential in our pension-less or social security–less economies. Investing in these, needs to be central to your budget however old you are, and however permanent or secure your job is now.

A globalized workforce and the volatile economy means that today the pension plan is an individual’s responsibility. The welfare state just can’t keep up.

References:

  1. HuffPost
  2. The Balance
  3. Wikipedia
  4. NY Times

Advt. No.: IA/Jul 2018/4191


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