Hi Kapil, I am glad to hear that your Dad is looking forward to a financial secure retirement. There are a few different questions there so I am going to take them one by one.
How to get 100% of salary in retirement?
The secret to a comfortable pension in retirement doesn't start with your mix of investments! The best way to ensure a good retirement is to start as early as possible, and save as much as possible. A financial planner can sit with you and help you estimate how much you would need to save a month for retirement, in order to reach your goal of 100% income in retirement, based on your particular circumstances, such as your existing provident fund.
The investment mix is still very important, and if you have 30 years before retirement you should look to maximise investments in growth assets, such as equities and properties. This means you would target investments that are characterised as high risk and high returns.
Remember, these investments will have some years of high returns, and some years of very low returns, but over 30 years, the good years far outweigh the bad and give you the best chance of getting good growth on your retirement savings.
What is the difference between a pension fund, provident fund and retirement annuity?
From what you mentioned, you are a member of provident fund. Pension and provident funds are retirement funds that you can only belong to through your employer. The employer and yourself then contribute to the fund at a fixed amount.
A pension fund differs from a provident in a number of ways, but the most important is that when you retire from a pension fund, you must convert at least two thirds of your retirement benefit into a monthly income (or pension). If you retire from a provident fund, however, you can take your whole retirement benefit as a lump sum, with no obligation to convert into an income.
That may sound attractive, but a pension fund allows you to receive tax deductions on your contributions when you make them, while a provident fund only allows those deductions when you retire, meaning your tax benefits are deferred.
A retirement annuity is a retirement fund that you can join as an individual, in your own name. You will receive a policy in your name, and you can choose how much you contribute to the retirement annuity each month. Savings you make in a retirement annuity can be accessed after age 55, and when you retire you will need to convert at least two thirds of the savings into a monthly income.
All the best with your retirement planning!