3 Reasons why you need a Pension Plan

Many of us go through our working life with the expectation that we make life better for our families, friends and ourselves. This is undoubtedly a great expectation to have however, with each passing day in our working life we inevitably draw closer to our retirement. The hard truth is that during retirement, not many people are able to earn any form of income other than what they may have saved during their active working life. To avoid the financial strain of retirement, one must be financially secure. A solution to securing one's future is to have an active pension plan.

What is a Pension Plan?

We can look at a Pension plan as an investment account that allows you to save regularly during your working life, in order that you will be provided monthly income or lump-sum benefits when you retire. Whilst some pension plans are solely state-sponsored, others are fully funded by the employer, employee, or both. Again, whilst some pension plans come with other added-value services like life insurance cover, unemployment benefits, mortgages, etc., others do not come with any complimentary services. Nonetheless, whichever pension plan you may purchase, the objective is just simple, “to ensure that you are financially sound during your retirement”.?

What are the Benefits of Pension Plan

1.? ? Pension Plan helps you to cultivate a savings habit

It is a well-known fact that we have a stronger proclivity to consume than to save. This is so because many perceive savings as a “sacrifice of today's good life for an unknown future”. But as my good teacher once told me, “it is better to do good, die to know that there is no heaven than to sin, die to know that there is heaven”. A pension plan is a long-term investment where you pay small and regular contributions and build a retirement corpus. This helps cultivate fiscal discipline. Start saving early, when you're young, let's say in your 20 and you'll have a nice nest egg by the time you retire (say at 60).

2. ? ? Pension Plan helps you to take advantage of the power of compound Interest

Retirement should be a wonderful, easy, and relaxing time of your life. Just like everything else, to have a befitting retirement lifestyle will require that you start planning for it early. As George Foreman exquisitely said: “The question is not at what age I want to retire, it is at what income”. Purchasing a good pension plan will allow you to invest regularly and build a huge retirement corpus. The longer you invest, the more likely you are to gain; with the power of compound interest, you can earn as much as two-thirds (2/3) of your total retirement benefits as interest.

3. ? ? Pension Plan serves as a safeguard for your loved ones?

Sometimes life just happens. Your life is a valuable asset. You can leverage it throughout your working life to build wealth. However, sometimes life has a mind of its own and for that matter, a solid pension plan helps you to mitigate the impact of any eventualities on your family. You can protect your family and secure a better future for them. Having a pension plan will ensure your family is taken care of even when you are gone.

Indeed, we must celebrate life in the present and live in the moment, but we must also remember that there comes a time when we will not be earning as much as we do now as professionals. We may not be able to do as much as we want to do to earn money at some point. The only sure way to ensure you are financially protected during your retirement is to consider a pension plan while you are still in active employment. If your current employer does not offer a pension plan, contact a professional pension manager and explore the prospects of a personal or private pension plan.?

You can start it now.

Issaka Ibrahim?(Pensions, Investments, & FinTech Consultant)