Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin

How Are Pension Plans Different From Mutual Funds?

Published On Sep 09, 2021

What Are Pension Plans? 

Pension plans are money growth strategies that allow you to designate a piece of your investment funds to amass throughout some undefined time frame and furnish you with consistent pay after retirement. Retirement and Pension Plans give you monetary security so when your expert pay begins to ebb, you can in any case live proudly without thinking twice about your expectations for everyday comforts

Benefits of Pension Plans

  • Guarantees continuous pay after retirement – The greatest benefit with benefits plans with conceded annuity is that it guarantees continuous pay after retirement; all in all, it furnishes you with the security that you will get benefits each month for the remainder of your life. You can likewise set the recurrence of payouts – month to month, quarterly, yearly, according to your prerequisites. 

  • You don't need to consider making a venture at the hour of your retirement – This is a major addition in light of the fact that a new speculation with X measure of cash 20 after 30 years may not get a similar premium it would have acquired at this point. Truth be told, you might need to put away more cash to get a similar measure of annuity. 

Drawbacks of Pension Plans

  • Cash is secured till development – You can't make withdrawals during crises or on the other hand assuming you need to change to another speculation road halfway. The National Pension Scheme (NPS) permits a most extreme withdrawal up to 60% of the corpus at the time of retirement and the rest should be contributed to purchase the annuity. 

  • Payouts are given with straightforward interest estimations – while every one of the little investment funds plans like PPF, EPF and so on gives you the office of accumulating the cash. Along these lines, the loan fee of any annuity plan is extremely low – at about 6%-7% – too little to even consider evening beat the swelling rate. Then again, little investment funds plans like PPF will give you a superior return. 

What Are Mutual Funds? 

A mutual fund is a monetary vehicle composed of a pool of cash gathered from numerous financial backers to put resources into protections like stocks, securities, currency market instruments, and different resources. Shared assets are worked by proficient cash supervisors, who apportion the asset's resources and endeavor to deliver capital additions or pay for the asset's financial backers. A common asset's portfolio is organized and kept up to coordinate with the venture targets expressed in its outline.

Benefits of Mutual Funds

With this drawn out speculation, you can brave transient changes – The upside of value reserves is that as you are contributing as long as possible, you could brave the short-term fluctuations and procure more significant yields. 

  • Helps save charges – Opting for an ELSS (Equity Linked Savings Scheme) Mutual Fund will likewise assist save with burdening under 80C and furthermore empower development. It is prudent to keep away from MFs that put distinctly in huge covers, as returns are low (about 10% yearly); as the ventures are for a long-term and for retirement objectives. It is fitting to pick a blend of enormous covers just as midcaps (where returns are better at 14%). 

Drawbacks of Mutual Funds

  • Try not to offer demise benefits and your candidate gets just the market worth of the asset – Moreover, value reserves are unpredictable temporarily and some of the time the danger may not merit the profits – particularly as the venture objective isn't beneficial however is important for your retirement arranging. 

  • Hardened leave loads for early recoveries – Mutual asset houses have arranged solid leave loads for early reclamations to restrict individuals from leaving before retirement. Try to look at the leave punishments in the event that you do settle on shared assets.


Both mutual funds and pension plans have their own set of features and norms. They have merits and demerits. However both of these are popular investment choices and if you are in a dilemma about what to choose then you should measure your needs and buy accordingly.

Must read: Top Pension Plans in India 2021

National Pension Scheme Explained

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 50 Lacs+ happy customers
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.