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An old-age pension is a form of retirement plan so named for the age at which benefits become available. There are many different types of old-age pension plans, which may also be called retirement or security plans. Old-age pension may be given through government programs, occupation-based plans, or through private pension funds taken out by an individual. An old-age pension plan is typically intended to provide a basic survival income for retired individuals.
Government old-age pension plans are meant to help retired seniors survive without a working income. Offered by national or regional governments, these are typically basic programs that may also provide medical care and housing discounts to qualifying seniors. Contributory old-age pension plans, such as the large Social Security plan in the United States, are generally available to all seniors, regardless of other savings, once they reach the age of retirement. Noncontributory plans, which do not require citizens to pay into the plan fund, are generally only intended for those below a certain income and asset level. Government plans are typically fairly inflexible, but can bring great relief to seniors who would otherwise be left in poverty.
Occupational pension is granted to some workers as part of their overall benefit package. Union workers, teachers, and government workers typically are granted occupation pension as a part of a job offer or after having reached a certain level of experience. These pension schemes typically require both the employee and the employer to make annual contributions, though some, such as many US teachers' pension programs, also require contributions from the government. Occupational old-age pension benefits may become available upon reaching the required retirement age, or after spending a certain amount of years working.
Private pension funds allow a person to funnel personal savings into a retirement account that matures when the account holder reaches a certain age. There are different types of private old-age pensions, such as annuities. Annuities require the policy holder to pay a monthly premium for a certain amount of years, then provide benefits after the fund reaches maturity. Benefits may be structured to last a certain amount of years, or may be guaranteed for the remaining life of the account holder, should they agree not to start receiving pay-outs until a certain age is reached.
Some financial experts recommend setting up a healthy private old-age pension fund early in life. Though government and occupational pensions can help make ends meet, they may be unable to keep up with rising costs of health care, and the cost of living, as well as the potential devaluing effects of inflation. By setting a pattern of contributing even a small monthly amount to a pension fund or retirement account, a person can gradually set his or her mind at ease about retirement, month by month.