Retirement Income

Retirement income is a type of employee benefits earned after years of service for a company. By law, employers should provide their employees various plans or pension schemes as a source of retirement income. Upon retirement, employees can receive a steady income source even if they ceased woking. Because retirement income as a steady income, retirement income policies are means to achieve financial security and still maintain high living standards even when employees decide to retire from work and reach old age. For the self-employed, however, they may or may not opt to have superannuation funds or retirement income.

It is compulsory for employers to contribute to a superannuation fund that will be the source of the retirement income of employees. Employees can access these funds when they retire. The contribution is at a standard percentage of the employees' salary.

Retirement income plans may either be in the form of defined benefits or defined contributions. Some retirement income plans may also be a combination of benefits and contributions. Retirement income in form of benefits are determined by factors such as employee's salary, duration of employment, retirement age, etc. Contributions, on the other hand, are considered investments - the returns of which go to the employees' accounts.

How retirement income Works

Employers should contribute a prescribed amount to the superannuation funds of eligible employees. There are specifications for eligibility such as age and terms of employment (full time, part time, casual). Contributions to these funds are done at least every three months. Employees may voluntary contribute to the funds either through salary deductions or personal contributions. The fund will be the source of their retirement income. The amount to be received would depend on employers' contribution and the growth of investments. In terms of benefits, it would depend on the length of employment, retirement age, and final salary.

Access to retirement income is regulated by the government. The superannuation benefits are categorised as preserved benefits, restricted non-preserved benefits, and unrestricted non-preserved benefits. For preserved benefits, retirement income can only be accessed on the preservation age, which depends on the employees date of birth. Restricted non-preserved benefits may be accessed only after fulfilling a condition of release, while unrestricted non-preserved benefits are readily available upon request.

Benefits of retirement income

Retirement income can be considered as a good investment. In cases of emergencies and sickness, money can be drawn from it. It will also be provide benefits to dependents of employees. Retirement income is a means to support one's self even if he or she ceased working.