Getting money every month without working sounds like a dream. But it can be real if you plan right.
Two popular options help you earn a regular income. One is a monthly income scheme. The other is a pension plan. Both give you money regularly. But they work very differently.
Let us understand each one clearly. Then you can pick what suits you better.
What Is a Monthly Income Scheme?
A monthly income scheme is simple. You put a lump sum amount into it. Every month, you get some money back as interest.
Your original money stays safe. You just receive the interest earnings regularly. Think of it like renting out your money.
How It Works
You invest maybe 5 lakhs or 10 lakhs in one go. The scheme pays you interest every month. It could be 5,000 rupees or 8,000 rupees, depending on the amount and interest rate.
This goes on for the scheme period. Maybe 5 years or 10 years. At the end, you get back your full original amount.
So you enjoyed the monthly income for years. Plus you got all your money back. Pretty straightforward.
Popular Monthly Income Schemes in India
The post office has a monthly income scheme. Very popular in small towns. Safe and trusted.
Banks offer fixed monthly income deposits. You put money in an FD. Choose a monthly interest payout instead of yearly.
Some companies offer monthly income plans. They invest your money and share profits monthly. These carry slightly more risk.
Senior citizen saving schemes also give monthly returns. Only people above 60 can invest in these.
What Is a Pension Plan?
A pension plan works differently. You save money for many years. When you retire, you start getting a monthly pension.
It is a long-term arrangement. You put in small amounts regularly. Later, you receive regular payments for life or a fixed period.
How It Works
During your working years, you invest regularly. Could be monthly, quarterly, or yearly. This money grows over time.
When you reach retirement age, the accumulated amount gets converted. Part of it becomes a monthly pension. Part you might take as lump sum.
The pension continues for your lifetime in many plans. Even after your money runs out, payments keep coming. This is the key difference.
Types of Pension Plans
National Pension System or NPS is government-backed. Anyone can join. Very low costs. Flexible investment options.
Employee pension schemes come with many jobs. Your company deducts from salary and adds its contribution. Builds up over your career.
Insurance companies offer pension plans. You pay premiums for years. At retirement, they start paying you a pension.
Immediate annuity plans are different. You pay one large amount. Pension starts immediately. Good for people who already have savings.
Benefits of Pension Plans
Income for life in many cases. Even if you live to 90 or 100, the pension keeps coming. No worry about money running out.
Tax benefits while investing. Your contributions often qualify for tax deductions. Saves you money every year.
Employer contribution in job-based plans. Your company adds money too. Free extra savings for you.
Disciplined saving. Small amounts every month add up hugely over 20 or 30 years. Pension plans force this discipline.
Key Differences Between Them
Now, let us compare monthly income schemes and pension plans directly.
Investment Period
Monthly income schemes need money up front. One large payment and you are done.
Pension plans need regular payments over many years. Small amounts stretched over decades.
When You Get Money
Monthly income schemes start paying immediately. Within a month of investing, you get your first payment.
Pension plans make you wait. You invest for 20 or 30 years first. Only then does the pension start.
How Long Payments Continue
Monthly income schemes have a fixed end date. After 5 or 10 years, payments stop. You get your original money back.
Many pension plans continue for life. Payments never stop as long as you live. Your original money gets exhausted, but the pension continues.
Principal Amount
In monthly income schemes, you get your full principal back at maturity. Your 10 lakhs comes back as 10 lakhs.
In pension plans, your accumulated money gets converted into a pension. You might take some as a lump sum. The rest funds your monthly payments.
Flexibility
Monthly income schemes are more flexible. You can usually exit early if needed. Might lose some interest but you get your money.
Pension plans lock your money for long periods. Early exit often means big losses. Less flexibility overall.
Final Thoughts
Both monthly income schemes and pension plans serve important purposes. They are not competitors. They are tools for different situations.
Young people should focus on building pension plans. Small investments now mean big retirement corpus later. The important thing is taking action. Research your options. Pick what fits your life. Get started. Regular income in old age does not happen by accident. You have to plan for it.
For readers interested in global pension trends, our UK-focused report explains why many eligible households still fail to claim Pension Credit and how the system works.
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