A payment made to the employee during their working period; a retirement or a fund made available to the employee during their retirement period.
The employee receives a predetermined sum. In your old age, the sum is provided in installments after retirement. A fund that is provided in a fixed amount after retirement is not a pension. Insurance companies, offices, employees, and other such institutions draft pensions for their retired employees.
Types of pensions:
Employment-related pension:
In employment pension, you are provided money in the thought that you are no longer earning an income of your own. To meet up your requirements and need, this pensions from the organization you worked is very much helpful.
In fact, a pension is a tax-free fund provided to you after your retirement age. Then this fund is known as the buildup of funds for later use.
State pensions:
Many states provide pensions to those people who became disable and somehow cannot function properly on their own.
Then, these funds help them to benefit in the later period. These are tax-free funds provided to people after their retirement.
Disability or special pension:
These funds are for people who are weak and disabled in some way. For this fund, they have to apply and reach the government. Then the government takes responsibility for old people in their state or nation.
Pension in an economic downturn:
In the current covid period state and other local regional governments are making their best way to deal with this pandemic. The most important priority of the government is the health and safety of the people in their state. The covid has hit economic situation in our country very hard.
The economic state of our country is very deprived and policymakers are examining the way to deal with the current economic situation. Policymakers have been trying to reduce the funds and revenue cost. then, the financial market is also going down in scale.
The public pension funds are depriving. In our country state holds 76% of the public pension and then there have been swings in the financial sector of the market. There has been a decline in the stock market and now the public pension has been generally at a pace.
Difficulty in contributions:
During this covid situation, every state faced a drastic fall in economy and in public funds. most of the funds were used in hospitals and health care institutions. The worst situation for the policymaker is to manage the funds and annual funds for the upcoming year.
The government makes a plan to meet the annual requirement of the coming year. Then, but the situation of covid has been so harsh that it didn’t meet as according.
If the revenue is declining then the state or the local government will not be able to meet the funds needed for the people’s requirement. The pressure to fulfill the pension funds will get to the most acute shortage, and the system will face severe problems.
For example; if you retire from an organization and, at the same time, the economy of the state or local government is falling.
The institution or the government would not be able to give you the funds. Because the government or the institution is not able to fulfill their own requirement at the moment.
For example; schools and other institutions in California face the exact problems. the risk and tension of pension funds planned for school employees were generally low. challenges will increase to meet the investment policies and the contributions will decrease. any reductions or any degrading of the economy will affect the pension funds and other funds too.
Impact on pension funding system:
If the economy falls down, basically the rate of everything thing will increase. We know the rate of petrol, onions, etc. increase day by day. When the government faces a revenue problem within itself. They increase the tax, rate of many products to fulfill the requirement.
If you learn about Kerala, that is the only state which provides regular pensions to the old age retired people. Then, they also provide food and other basic daily requirements. every month old people and other retired people from institutions get a pension.
but when the economy falls down. For example; in a covid situation, all the funds are spent on healthcare institutions. the funds will be used in health care and the funds for the next fiscal year will below.
Pension is important for an employee getting to retire from an institution or for a disabled person trying to get his needs done.