If you are just beginning your career, it may sound ludicrous to be thinking about retirement blues, but making judicious pension plans now will go a long way in helping you cope with the twilight years. More so as proper planning determines the quality of life in old age and should not be treated as a low priority.

So start planning in right earnest. You have two options to choose from: you could either join your company's occupational scheme or set up a personal pension for yourself.

The most popular pension plan for employees is the Provident Fund (PF). PF refers to a lump-sum payment that you will receive when you retire. You contribute 12 per cent of your basic salary every month and your employer will put in an additional 12 per cent. This contribution continues till you retire. The sum that you put by thus will also collect an interest of 12 per cent per annum. The benefits of PF naturally depend on the length of your service, the level of your salary and the contributions.

Then there is the Public Provident Fund (PPF), to which you can contribute any amount that you want, up to Rs 60,000 in a year. Your employer, however, does not contribute anything to this fund. Both PF and PPF funds are managed by the Provident Fund Commissioner.

If you are a full-time employee, you can also avail of schemes such as gratuity and the Super-Annuation Fund (SAF). Gratuity is a lump-sum payment and is the money given to you by your employer in recognition of your services. Your employer can contribute amounts that vary between 4 and 9 per cent of your basic salary, for each completed year of your service.

SAF consists of a contribution made entirely by your company it could be about 10 per cent of your basic pay. Most companies turn over the money to the LIC. They also have the option of managing it via their own trust. It is from this corpus, currently totalling Rs 8,600 crore, that you get your pension payments.

So, in all, with 12 per cent as your own contribution to PF and approximately 31 per cent as your employer's (maximum), as much as 43 per cent of your basic pay is being kept aside to meet the needs of your retirement years.

In case you are not employed full-time with any organisation-for instance, if you run a consultancy, or you work on a contract that does not contain a PF option you can go in for the private pension schemes available in the market.

Under these schemes, individuals pay contributions into a fund managed by an insurance company or any other institutional investor, which provides cash in a lump-sum when you retire. Additionally, all employees have the option of paying premiums into personal private sector schemes of their own choice in much the same way as the self-employed would put money into personal annuity schemes. This means that the employee does not have to change his pension scheme whenever he switches jobs.

Some of the private schemes available are the UTI Retirement Benefit Plan and LIC Jeevan Suraksha. To avail of these, you have to invest a minimum amount every year till you retire: Rs 9,000 in Jeevan Suraksha and Rs 10,000 in UTI. The likely rate of returns are 14 per cent for UTI and 10 per cent for LIC. So, if you invest Rs 250 a month for 30 years in the UTI Retirement Benefit Plan, you would get Rs 12.20 lakh when you retire. In the case of LIC Jeevan Suraksha, it will be Rs 6,361 per month without life cover and Rs 4,674 with life cover. Besides, your investments get favourable tax treatment under Section 88; Jeevan Suraksha also offers tax benefits under Section 88 CCC.

Contributions to private schemes are far less than what you might be blowing up in your golf club, but they go a long way in ensuring that you don't have to cut corners in order to live after retirement. In fact, people fondly imagine that their retirement will be one long holiday, complete with foreign trips and eating out. But who will pay for it? You need to replace dreams with sound pension arrangements.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.