Pensions Schemes and How They Work

Most people who have full time jobs have a pension scheme in place. A pension scheme is simply a financial arrangement put in place by the employer to ensure that workers continue to receive a regular income even if they are no longer working.Pension schemes may differ from one organization to another but the basic principle is the same.

Types of pension schemes

Pension schemes are available in many forms. One of the most popular pension schemes is the contributory pension plan. This is a pension scheme that allows the employee to contribute a certain amount of money monthly or quarterly to a pension fund. One feature of the contributory pension scheme is that the employee is not allowed to make withdrawals from the pension fund until he or she retires. Another feature of the contributory pension scheme is that the employer contributes a certain amount of money to the pension fund too. An employee who has a contributory pension scheme is eligible to receive a lump sum at retirement and a monthly income afterwards.

Disability pension scheme

This pension scheme is meant to take care of workers who get seriously injured or disabled in the course of doing their jobs. The purpose of this scheme is to ensure that the worker in question continues to receive an income even if he or she is disabled and unable to work. This pension scheme is provided by private employers as well as government agencies.

As stated already, a pension is a financial safety net. If the worker in question can no longer work, it is only fair that he or she receives some cash monthly. In some cases, retired people receive a lump sum of money in addition to the monthly pension. In other cases, a certain amount of money paid to the retired person monthly as pension.

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