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Pension Plan
Regular Income After You Have Retired
Can Get Insurance Cover
No Risk Investment
Tax Benefits
The policies that are used to build a corpus for your retired life are called pension plans or retirement plans. Under the pension plans, individuals can save a certain amount of money in the plan to build a capital that would help them in leading a good life after retirement. The key aim of a pension plan is to create a retirement investment or a sum of money that would allow an individual to have a normal and regular earning even after he/she is retired.
What is a Retirement Pension Plan?
A retirement pension plan is a policy of investment that helps an individual to collect or build a large sum of money as saving over a long period of time. This sum of money helps in securing their future monetarily so that they can easily deal with any untoward situation in life.
Hence, with the help of a pension plan, one can secure their future and make sure to have a stable income coming on a regular basis after they are retired.
Irrespective of the savings and the investments that you have made, investing in the best pension scheme is still a pivotal thing. This is because a pension plan helps in building a long-term financial cushion to help you financially.
The primary feature of a best pension plan in India is that under such plans, the policyholder needs to make a payment of a specific amount regularly till the person is retired. And after the person is retired, he/she can have the amount back as an annuity or pension on a regular basis to deal with post-retirement eventualities.
Best Money Back Policies in India 2022
| Insurer | Plan Name | Eligibility age | Vesting Age | Policy Term | Annual Premium |
|---|---|---|---|---|---|
| Aditya Birla Sunlife Insurance | Aditya Birla Sunlife Insurance | Between 25 years to 70 years | 80 years | 5 to 30 years | INR 18,000 |
| Bajaj Allianz Life LongLife Goal Pension Scheme | 18 to 65 years | 99 years | 5 to 10 years | INR 60, 000 | |
| Exide Life Insurance | Exide Life Golden years Retirement Plan | 18 to 65 years | 55 to 75 years | 10 to 42 years | INR 24,000 |
| HDFC Life Insurance | HDFC Life Click 2 Retire | 18 to 65 years | 75 years | 10, 15 to 35 years | INR 24,000 |
| ICICI Pru Life Insurance | ICICI Pru Easy Retire Pension Scheme | 35 to 70 years | 45 to 80 years | 10, 30 years | INR 48,000 min |
Types of Retirement Pension Plans in India
There are several kinds of best retirement plans available in India, which can be divided into different categories as mentioned below:
Deferred Annuity
Under this best retirement plan in India, the insured can accumulate a corpus by making single payment or payments at regular intervals. This way, they can save enough money throughout the policy duration.
Immediate Annuity
Under this type of annuity pension fund in India, the insured gets immediate payouts. They need to invest a huge sum of money and in return, they start earning annuities immediately as pension. This policy allows the insured to avail from among a large number of options to earn an annuity on the invested amount.
Annuity Certain
This is one of the finest and best pension schemes in India. Under this plan, the insured can receive annuities for a fixed number of years. Here, the insured can opt for any payment period that they are convenient with. If the insured dies, the nominee of the plan receives the contribution.
The National Pension Scheme (NPS)
Besides the private insurers and policies, there are several retirement investment plans offered by the Indian government and the post offices in the country. Insured can contribute here regularly and save at standard intervals through a pension account. Later this amount is paid out after the person is retired.
Feature and Benefits of Retirement Pension Plans
Retirement plans India have many important features and benefits. Some of them are mentioned below:
Regular money
The pension plans allow the insured to get a stable flow of money coming at regular intervals. This consistent amount of money allows the person to stay financially independent.
Annuity
This is a very prominent feature of a pension plan. The annuities are of two types: immediate and deferred. In case of the immediate one, it starts instantly. So, here the insured starts receiving the amount right after investing the amount in the plan. On the other hand, in case of the deferred annuity the insured starts getting the money after a particular time period.
Accumulation time
The retirement plans in India allow the investors to make the payment of the premium at one time or on a monthly basis.
Vesting Age
This is the age that an insured starts getting the monthly pension. Many insurers allow vesting time to be 45 to 50 years, while some of them have up to 90 years as vesting time.
Surrender Value
This is the amount of money that an insurer pays the policyholder in case they surrender their retirement plan before the maturity period. However, there is a minimum period that you need to have this policy to get surrender value. Further, by surrendering the plan, the insured loses all benefits associated with it.
Among the various benefits of pension scheme in India include:
- Helps the policyholder in accumulating wealth over a long period of time.
- Allows guaranteed income in the post retirement time
- Some retirement plans allow life insurance cover to protect family in case of the insured individuals untimely demise
- Retirement plans allow the investor to avail tax benefits in the form of exemptions.
- Retirement plans also allow individuals to gain capital via compounding.
Factors to Consider While Buying Pension Scheme
There are various factors that need to be considered while buying a pension plan in India. Some of them are mentioned below:
Monthly Payout
When you plan for your retirement you must keep your monthly expenses in mind. Since you will have your source of income restricted after retirement, you would require a fixed income for your regular expenses. Thus, it is essential to build a financial base to take care of your expenses.
Price Rise or Inflation
Another thing to remember is the inflation rate so that you can plan the corpus required after retirement accordingly.
Life Expectancy
This is another thing to remember as you cannot predict how long you will live. So, when buying a pension plan, you should ensure that you should have sufficient funds to fulfill your financial needs after retirement.
Medical Expenses
During old age, one huge expense that every individual has to bear is that of medical expenses. Thus, you must have adequate funds in your pension plan so that you can deal with any kind of medical emergencies.
Comprehend Your Financial Requirements
You have to realize how much money you need to sustain yourself and the people dependent on you. This way, you can understand your financial requirements.
Understand Products
Since a large number of pension plans are available in the market, you must shortlist the best ones and compare them well before buying the one that meets your expectations.
You can use the best pension plans in India calculator to calculate the amount of pension you would require post retirement.
What do you mean by Retirement Planning?
Retirement Planning means the process through which you can plan your short-term and long-term monetary goals. It also means the various ways in which you can achieve these goals.
For retirement, it is essential to keep in mind factors such as liability that you have, expected expenses of your as well as life expectancy. Further, you can consider the asset and income/savings you have. It is always recommended that you start your retirement planning early, as this has a considerably lower financial burden in the form of premiums. This way, you can not only take care of your present needs but also ensure a secured life after retirement.
Frequently Asked Question
Annuity is the payment that is received at regular intervals after retirement through your pension plan. It can be either received on a monthly, quarterly basis as well as on bi-annual or annual basis. There are different kinds of annuities available under a retirement plan, namely;
- Deferred Annuity
- Immediate Annuity
- Fixed Annuity and
- Lump Sum Annuity
For retirement, the minimum age of entry is 18 years, while 65 years is the maximum entry age of retirement for most such plans.
All pension plans have a minimum guarantee. This minimum guarantee is the guaranteed amount that the insured will surely receive at maturity or the end of the policy term.
The key features of a retirement plan are:
- They offer different types of annuities
- They help in investments
- They aid with compounding benefits
- They allow guaranteed income after retirement
- They allow tax benefits
The reasons to purchase a retirement plan are many, such as:
- It helps in accumulating a good amount of capital to make one financially independent after retirement.
- It helps one to enhance their corpus for the phase of life after retirement.
- It also allows death benefits to the nominee in case of the unfortunate death of the policyholder during policy tenure.
Depending on the plan, some retirement policies allow partial withdrawals of money after a certain period of time during the tenure of the policy.
The different factors to consider while purchasing a retirement policy are:
- The monthly expenses of the policyholder or how much money you think you would require per month.
- You have to check the inflation also
- Your life expectancy also has a role to play
- Besides, medical expenses and debts are also needed to be considered before buying a retirement plan.
To determine pension various things are considered such as the gender of the policyholder, savings amount, age of the policyholder as well as the chosen mode of annuity by the policyholder.
Different types of retirement plans are:
- Immediate annuity retirement plan
- Deferred annuity retirement plan, and
- NPS or National Pension Scheme
Yes, you can have multiple plans of retirement. You can invest in different plans as per your need. But, for NPS or National Pension Scheme only one plan is allowed per person. So, you cannot buy an NPS more than one time.
