Recently I received a query from a reader about SBI Pension/Retirement Plans.
“Can an Individual who is not an employee of SBI will be able to join SBI Pension & Retirement Plans?”
Well, many people in India still have a false belief that, they can only invest in SBI Pension Plans if they are the employees of SBI. But well, This is not true. In Today’s world, All the Pension Plans are changed from “Defined Benefits” to “Defined Contribution” Plans.
Once upon a time, there were only Defined Benefits Plans. These were the Pension plans which were only for the employees of the respective Companies. Means in our case SBI. In defined Benefits plans, the institute or government has to pay to the employee certain amount of Pension until he dies because he has served whole of his life to that company.
But Now the Modern Plans are Defined Contribution Plans. Means the Company will allow anyone (Even if he/she is not an employee of that Company) to join its Pension Plan schemes. But here, the final out come will be one’s contribution for his/her own life time only.
Means Any Indian Citizen can buy SBI Pension Plan Now. But they are Market Linked (ULIPs) pension plans. So you will get more money after retirement if you contribute more. So to get more benefits after retirement, you have to save & invest in your Pension Plan more. The Company in which Pension plan you have joined will not contribute anything. It will just manage your money.
Modern Pension Plan will provide you Capital Growth, Life Insurance & tax Benefits. In other words, Modern Pension Plans are nothing but the opaque mutual funds. Anyone can join them but they will work exactly same like the mutual funds.
But the great difference between Pension Plans and Mutual Funds is that, Mutual Funds have 0% Entry Load while Pension Plans will eaten up as high as 10-20% of your initial Capital.
So You can Join SBI Pension Plan even if you are not the employee of SBI.
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