What Is Pension?
A pension is basically a company sponsored fund that is supposed to provide a company's employees with a liveable income for their retirement years. These funds are provided to the employees in return of their services provided to the company for a specific period of time.
A Word About The Pension Plans For Teachers (UK):
Pension plans help teachers to plan for their retirement. The pension plans are basically made by the government or the state or the region in which that teacher is working, it depends upon the level of education of the teacher, at what level the teacher is teaching and finally at what age the teacher is retiring. Normally the retiring age of teachers is said to be from 55 to 65 years depending upon at what age they started teaching.
Many professional employees on a retirement plan through their employer save for the future on a 401(k) plan (A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pre-tax basis. Basically, this plan allows worker to make savings without any taxes. The employees take a portion of their wage from the employee and they bank their portion of wage into their account. This portion of wage which is collected from the employee and then saved in the bank is also known as contribution).
Most of the public and junior school teachers prefer to take the defined-benefit contribution plan which takes under consideration the main factor which is the number of years a teacher has worked and how much was his or her salary. There is also another factor which is expectancy of life (if an individual is healthier than he/she can work longer than the age limit). Most of the times, the employer will contribute to the retirement fund so that teachers don't have to pay taxes on that amount. The state can also contribute the difference, if the teacher isn't required to make any contributions. Many public school teachers still work with the 30/55 retirement plan, which means that after putting in 30 years of service, they get to receive benefits at the age of 55. The main advantage of using these plans are an individual only needs to choose a plan and needs to invest in the plan according to its requirements and whenever needed, he can withdraw his/her investments in a profitable form. Another positive aspect of these plans is that every year as inflation is rising at a decreasing rate, these pension plans are also increasing the pension rates accordingly. Equities are now more widely used for investment instead of bonds, since equities are generally more profitable. Once a teacher is allowed to start receiving benefits, he or she can choose to receive payments as annuities (receive in regular payments) or make withdrawals, depending on the particular plan. Teachers cannot receive the same salary amount from when they were working as their annuity, but they can receive up to 50%-60% of their final salary.
Some public school systems are also starting to work with the defined-contribution plan, which is more similar to retirement plans in the private sector. These plans rely more heavily on the employer as a contributor, because in these plans, each member has to make contributions from their income and these contributions are then invested for instance they invest in the stock markets and whatever the return is obtained, it is returned into the employees account. These contributions can be taken from both the employer and the employees and the return obtained are returned into the employees account. Who either matches what the employee pays or commits to contributing a set amount or percentage independent of what the employee sets aside, if anything. Some argue that this system is more secure, as the amount pledged for retirement is backed up by the Pension Benefit Guaranty Corporation, in case there was an error in budgeting. The defined-benefit plan currently has no back up system.
Pensions In Pakistan:
Basically, the pension plans infrastructure in Pakistan in comparison with developed countries is very weak. The main reason for that is because Pakistan is one of the developing countries and does not have enough budget as well as enough resources to spend on those people who are retired from their jobs. This is because the government has to pay to those who are currently employed to their jobs.
Government plays an important role in this in such a way that the bureaucracy system is biased in Pakistan and it has a hold of mainly every activity in that country. The bureaucracy system is corrupted in Pakistan and it is the main reason for almost every system related to money is not efficient. That is the reason that people of Pakistan prefer private job sectors instead of the government job sectors.
In Pakistan as it is a developing nation there are two sectors for job in teaching, private and the government sector.
The teachers who are employed in the private sector are usually very highly paid as they are very highly qualified. That is because these private institutions have to keep up their reputation so that they attract more students. These institutions also have high fee levels, but these private institutions do not offer pensions because in Pakistan they offer such huge amount of pays and facilities that one can save a lot from it. Their pays range from 3000 to 7000 pounds per month in Pakistan.
As compared to the government sector, teachers are paid usually very low unless they have experience of say 10 to 15 years. The government institutions in Pakistan, talking about the most of them, they don't have a really good reputation and they don't really bother much about it. That is because these institutions are being governed and managed by the government itself and the government of Pakistan is in a lot more crisis and there is a lot more to take care besides the educational department and that one of the main reasons that Pakistan does not have a good educational system.
About the pensions paid to the teachers in the government sector, it depends upon that how much a teacher is educated and at what grade a teacher is retired. These grades start from 8-22 and the pension rises as their grade rises. The rate of their pension is starting from 200-1500 pounds per months. One can argue that the advantage of retiring as a government teacher is that he/she enjoys additional facilities along with their pensions. Some of these facilities are that they get free house allowances, free transport vehicles like bikes and cars, reduction in house bills and free communication allowances. The purpose of explaining these facilities provided by the government in two extreme points i.e. one being the facility of house allowances is rather an expensive option for the government to provide to the concerned individual, rather than facilitating the individual with free telecom services (which is cheaper compared to house hold facilitation). It is easier for the government to provide the cheaper facility rather than the expensive one. To gain the expensive facility one has to have strong contacts with the elite of the bureaucracy circle. Otherwise the government will provide you with facilities which might not have great importance to the individual needs.
Pensions in Pakistan are really low and in some of the cases it is as low as 80 pounds per month, and even lower than that.
In Pakistan there are not many pension plans and some of the existing plans which are, they are not as well as the pension plans in the United Kingdom. As I have mentioned before, due to short sightedness of the bureaucrats blinded by corruption.