Difference between Gratuity and Pension Funds

https://oracleaccountingall.blogspot.com/2019/04/difference-between-gratuity-and-pension.html

BASIS FOR COMPARISON	GRATUITY	PENSION
Meaning	Gratuity can be understood as a social security benefit provided to the employees by the employer in appreciation of service, after their retirement or death.	Pension is a saving scheme, wherein employer invests certain sum to guarantee payment of definite sum at regular intervals, to the employee or his/her dependent survivors, after retirement or death.
What is it?	Gift	Retirement plan
Payment	Lump sum payment	Installment Payment
Contributory service	Minimum 5 years of service is required.	Minimum 10 years of service is required.

Key Differences between Gratuity and Pension

The difference between gratuity and pension can be drawn clearly on the following grounds:

1. An after-retirement social security benefit provided to employees by the employer, as a mark of recognition for the services provided by them, is known as a gratuity. Conversely, the pension can be explained as an investment vehicle wherein employer invests a fixed amount to assure payment of definite sum at periodic intervals, to the employee or his/her dependent survivors, after retirement or death.
2. Gratuity is nothing but a gift or gratitude given by the employer to the employee, for his contribution to the organisation. As against, the pension is a retirement plan, in which a particular sum is invested by the employer to guarantee payment to the employee after the termination of employment.
3. Gratuity involves one-off payment in which the entire sum is provided by the employer at once. Unlike pension wherein, the employee gets a fixed sum in the form of monthly installments.
4. For the entitlement of pension, at least ten years of contributory service is required. On the other extreme, to become eligible for gratuity, a person needs to work for a minimum of 5 years with the same organisation.