Pension Plans
A pension plan is like a savings account for retirement. You put money into it regularly until you retire. After retirement, you get that money back as a regular payment, kind of like a salary, to help with expenses. This helps you in securing your future and dealing with any difficulties you may face without being dependent on anyone.
Highlights Of Pension Plan
Most popular Pension Plans
Invest an additional amount so that you get a higher guaranteed regular income
Get 1% extra annuity when you use your National Pension Scheme (NPS) savings to buy the plan
Enjoy tax benefits under Section 80C of the Income Tax Act of 1961
Partial withdrawals during the accumulation phase in emergencies.
Invest an additional amount so that you get a higher guaranteed regular income
Get 1% extra annuity when you use your National Pension Scheme (NPS) savings to buy the plan
Enjoy tax benefits under Section 80C of the Income Tax Act of 1961
Partial withdrawals during the accumulation phase in emergencies.
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Pension Plan - Everything you Need to Know
Documents Needed to Buy a Pension Plan
What is a Pension Plan
Investing in a retirement pension plan is a smart way to save a lot of money over time. This helps secure your financial future and prepares you for unexpected expenses, ensuring a steady income after retirement for stability. Choosing the right pension scheme is vital for long-term financial support in your retirement years.
Types of Pension Plans
You can accumulate corpus by making a single or regular payments.
Invest a large sum and start earning immediate annuities as a pension.
You will receive annuities for a fixed number of years and your nominee will receive benefits in case of your untimely death.
Indian Government and post offices offer various pension plans where savings are paid out after retirement.
Includes life cover and investments; the family receives a lumpsum in case of the policyholder's demise.
Features and Benefits of a Pension Plan
A pension plan gives you to steady stream of money at regular intervals, ensuring financial independence.
There are four types of annuities – immediate, deferred, fixed, variable and lumpsum. Immediate starts right away, deferred starts later, fixed pays the same amount throughout, variable offers varying payouts, and lump sum pays out all at once.
Retirement plans allow one time or monthly premium payments.
The age when you start getting a monthly pension. Many choose 45 to 50 years, while some go up to 90 years.
If you surrender your plan early, this is the amount that the insurer pays you. However, there's a minimum period required to get this value.
How to Select the Best Pension Plan
Here are some factors you must consider while buying a pension plan in India.
Consider your monthly expenses, inflation, life expectancy, and medical costs when calculating the desired maturity amount.
The longer you invest, the better it is.
Your premium is based on the desired payout at the end of the policy period.
Look for additional coverage and emergency support.
Choose from options like GRP, equity, debt, or balanced funds based on payout and term.
Check if you can pay in a single or regular installments over 5, 7, or 10 years.
Choose quarterly, semi-annual, or annual payments as per your convenience.
Review policy documents for charges and benefits before choosing any plan.
Shortlist and compare plans based on payout terms, interest rate, annuity options, vesting age, etc.
Documents Needed to Buy a Pension Plan
Address proof: Driving license/bank statement or passbook with latest entries/passport/voter ID/Aadhaar card/ration card
Identity proof: Aadhaar card/voter ID/passport/PAN card
Age proof: PAN card/Aadhaar card/passport/voter id card/marriage certificate/ration card/birth certificate/driving license
Photo: Passport-size photographs of the individual
Income proof:
- For high sum assured cases, income proof is also needed.
- Salary slips of last 3 months/Income Tax Returns/employer certificate/latest bank statement/latest form 16.
Benefits of Comparing Pension Plans
You can identify high-performing investment plans with better returns to achieve your goals more effectively and faster.
In an investment policy, there are different types of riders available. You can easily compare and choose a plan that meets your specific requirements and offers the best coverage.
You gain a better understanding of the investment market and learn about the different types of benefits for staying invested for a particular time to get the payout.
Once you compare the above points, you can find the right plan based on your risk appetite and customise it as per your needs.
Plan Comparisons
Features |
New age retirement product - from Insurance Companies |
NPS |
PPF |
|---|---|---|---|
Tax-free Income on retirement |
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Tax-free fund value withdrawal |
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Tax exemption on the amount invested |
Section 80C – up to ₹1.5 lakhs
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Section 80C – up to 1.5 lakhs and ₹50,000 section 80CCD (1B)
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Section 80C – up to ₹1.5 lakhs
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Flexibility to fully withdraw fund value anytime |
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Yes (if the corpus is less than equal to 2.5 lakhs)
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Yes, only after the 6th financial year.
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Flexibility to increase/decrease pension |
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Choice of multiple investment strategies to maximise returns |
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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.
