Meaning of a Deferred Pension Plan
A deferred pension is a term that refers to pension investments where the pension does not start immediately. Instead, you can choose to start the pension after a few years. Thus, you can invest a large lump sum amount in a deferred pension plan while you are still working. You will aim to receive the pension when you retire.
Note: If you are planning to opt for a deferred pension under EPFO, you must first be an EPFO member. To qualify for EPFO membership, you generally need to be employed with an organisation that has more than 20 employees, be between 18 and 54 years of age, and earn a basic salary of up to ₹15,000 per month
The money will continue to grow until then. However, the growth continues even after the pension starts. But with withdrawal, most of the accrued interest is paid out.
Pension is money paid to you each month after you retire. The amount paid depends on the retirement corpus created during your earning years. You will continue receiving a pension until the end of your life. Your spouse may also receive a pension after your demise, depending on the pension plan that you have opted for.
Deferred pension schemes are similar to deferred annuities. You may opt to get a lump sum on or after a certain date, or avail yourself of regular payouts in the form of annuities.
For example, in your 30s, you must work towards building a corpus by investing regularly. Starting early gives you the advantage of allocating your investments to high-growth funds so that you initially build wealth and then move into conservation mode as you approach retirement.
