The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
What is a group pension scheme?
A group pension scheme is a benefit which an employer sets up for his employees. Such schemes are also known as group superannuation schemes.
A well-structured group superannuation plan can help in creating a fund during the working lifetime of the employees. This corpus is used to fund employees’ pension benefits after their retirement. The employer can contribute up to 15% of the basic salary of the employee towards this fund.
The employee can also make voluntary contributions to the fund. Investment of up to Rs1 lakh per annum in the schemes by employers for each employee is exempt from the fringe benefit tax.
I am a 50-year-old Union government employee. I have not invested in a separate pension scheme or medical policy, because I am guaranteed medical care and pension. But I now feel both will not be sufficient to meet my needs after retirement. How should I invest to ensure that in another 10 years’ time, I have additional financial security?
Clearly, you feel that you need to be making further provision for your retirement. This is an extremely sensible decision as not only are we living longer (and consequently, our retirement savings have to last longer), but health care costs are also rising hugely (and as we get older, we tend to need greater levels of more expensive health care).
One way to build up your fund for retirement is to start investing in a pension plan as early as possible. Even at your current age, it is not too late to invest in a pension policy. This will ensure you a regular additional income on retirement.
You should also examine closely the level of health care you will have post-retirement. If you feel this will not be sufficient, then you should also consider investing in a health insurance policy.
The simple rule on when is the best time to invest in a pension and/or health care plan is, the sooner the better!
Readers are welcome to write in with their queries to email@example.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Bert Paterson, managing director, Aviva India.