Pension Plan Guide

At some point in life, we all start planning for our retirement. Taking into consideration the rise of inflation in the country and limited social security initiatives for senior citizens, it is wise to start planning your retirement well in advance.

Let this article be your go-to guide for pension plans.

What Is A Pension Plan?

A pension plan is a financial instrument that provides you with dual benefits of both investment and insurance. All you have to do is make regular payments towards the policy, which in turn accumulates enough capital over time. The accrued money can then be utilized during your retirement days.

It is highly recommended to start investing in a pension plan early in life. This way, you will have a vast corpus to rely on when you retire. However, you must choose an appropriate pension plan that rises above inflation and allows you to benefit from the power of compounding.

Further, we will be discussing types of pension plan available in India.

Types of Pension Plan

Here’s a list of five reliable pension plans in India 

PENSION PLAN TYPE

DETAILS

NATIONAL PENSION SCHEME (NPS)

  • It is handled by the central government. Here, the premiums paid are invested in to funds of your choice (either equity or debt funds).

  • After retirement, you can withdraw 60% of the accumulated amount. The remaining should be used to purchase an annuity.

  • As per the latest Budget, the entire lump-sum withdrawal at the time of maturity is exempt from tax.

PENSION FUNDS

  • You receive much better returns after maturity.

  • It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) of India.

  • At the moment, only six fund houses are authorized to provide pension funds across the country.

ULIPS

  • Unit Linked Insurance Plans are more like a financial instrument that provide dual benefits –get life coverage as well as an option to invest in funds of your choice.

  • It is quite a reliable retirement plan, and you can start it early in life.

  • Under ULIP tax benefits, a premium amount up to INR 1.5 lakh is exempted from tax under Section 80C of the Income Tax Act, 1961.

DEFERRED ANNUITY

  • You have to pay a definite premium amount or a single lump sum amount over the policy tenure.

  • Pension begins after the investment

  • No Taxation

IMMEDIATE ANNUITY

  • You can only make lump sum investment

  • Pension begins immediately after the investment

  • Tax is exempted on premiums paid

  • The nominee can claim the sum insured after your (the policyholder’s) demise

ANNUITY CERTAIN

  • Pension is disbursed for a specific period

  • You can choose the period. For instance, you need pension when you reach the age of 65 years

  • The nominee can claim the sum insured after your (the policyholder’s) demise

Things to Remember Before Purchasing Any Pension Plan

  • Before you invest in ULIP plans, estimate an amount that you will need to accomplish your financial goals

  • Take into consideration your current income and then fix an amount that you want to pay towards the plan

  • Browse and compare different pension plans online and choose one that best suits your needs

  • Do not select the cheapest options available. Understand the underlying terms and conditions of the policy

  • Do not select the product based on its tax-friendliness

A Final Thought

You must understand and compare different pension plans online. Look for their features and the benefits they offer. Once you find a plan that fulfils your retirement needs, move ahead and start investing in it.  

Happy Customers of Finserv MARKETS

Getting a loan to take care of my wedding and relieving my parents to enjoy the occasion was the best decision I ever made. Easy-to-apply, amazing interest rate and quick disbursal, what more can one ask for!

I am passionate about the vehicle I drive. I want to protect it with the best available option. What amazed me was the full transparency, quick quotes and the attractive discount on the premium while choosing the annual payment option!

Check your personal loan eligibility in seconds!

My husband and I will finally move into our own house this Diwali. All thanks to Bajaj Finserv, with competitive interest rates, minimal processing fees and easy to repay EMIs, our dream saw the light of reality in no time!

Get the best FD interest rates starting @ 8.40%. Let's start!

Kids grow up fast and to fulfill their dream trip to Disneyland I had everything but instant funds. With no collateral or guarantor required and a hassle-free processing, I gifted my family a memorable trip to Orlando with just a click!

Get sum insured up to 1 Crore! Let's start!

The best way to start looking for health insurance is to do a close study of the coverage needs and checking the insurance company's claim ratio. No unnecessary jargons, easy to apply claims process and choice of premia!

Zero additional charge on part-payment option on Business loans! Let's start!

I bought my first iPhone using my Bajaj Finserv EMI Network Card. Zero downpayment with a No cost EMI on Bajaj Finserv EMI store just made my day!

Get home loan sanctioned online in 72 hours! Let's start!