Things You Must Know About Pension Plans

It is extremely important for people to begin thinking and planning about their retirement as soon as possible due to the rising inflation and living cost. The best part is that there are numerous pension plans available for making our old age easier and convenient. But before investing in a particular pension plan, have a look at some essential aspects you must know about such plans:

Accumulation period

An accumulation phase is a time gap between the start of your policy and the time you retire and get all the advantages. You will need to pay the premium during this phase. These premiums will be invested in some financial units and you will come across some tax deductions on these premiums.

Annuity plan

While retiring, you will just have the ability to withdraw one-third of the finances that you have accumulated in your pension plan. The other 2/3rd of the money will be invested in an annuity plan. You will be given a monthly pension depending on the plan you will pick.

No flexibility

It is very important to choose your plan wisely because if you choose one, you will have no option to change it for a few decades. Due to this, you lose the ability to use your assets in an emergency and change the investment plan in the midway.


Having such plans allow you to have savings and maintain financial discipline throughout your life. A non-installment of charges could end up being fantastically costly, and individuals will consistently financial plan for their expenses and other essential uses prior to arranging the remainder of their accounts.

Not tax exempt

Yes, you may have to face certain deductions when it comes to paying premiums towards your pension. But, the original pension that you will be getting is taxable

Invest instead

If your priority is to have returns tax-exempt, try investing some finances in PPF, mutual funds, and equities instead. It is a fact that with all sort of investments, you will have to bear some pros and cons

Less diversity

Most of the pension plans provide only some avenues for making investments. Because of this, you will not be able to balance and diversify your portfolio properly. You will gradually get the pension plan bur you may be able to get high returns in case you utilize various investment opportunities for diversifying your portfolio

National pension schemes will not be the best choice

Most people go for picking an NPS and not other pension plans because of the low fund management fee. With these schemes, you will get little flexibility because the retirement age is 60 and the only amount you will be able to withdraw is 10% out of the accumulated fund per year. Other than this, the plans from NPS consist of higher tax brackets

Every pension plan comes with its own perks and cons, but it totally depends on you which one would you opt for. These were some major things you should keep in mind when choosing a pension plan. You can take help from an SMSF administration in Sydney and get the most out of it.

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