Pension Plans

Your retirement is the time where you can finally hang your professional boots and look forward to a relaxed, more comforting stage of your life. An ideal retired life should be without any financial stress. With an effort to make sure that one does not have to struggle for financial stability in the absence of regular monthly income in the retired life, several individuals start planning their retirement investments early. There are several such retirement plans to choose from. One such popular investment tool is ULIP pension plans.

What are ULIP pension plans?

As compared to normal retirement plans, pension ULIP plans offer the benefit of investments too. A Pension ULIP is a type of financial tool that simultaneously provides the benefit of insurance as well as the opportunity to invest your corpus post-retirement.

Types of ULIP pension plans

  • Deferred Annuity Plan: In this pension plan, the premium is paid for a limited period. As soon as the tenure ends, the pension starts.

  • Immediate Annuity Plan: Under this pension plan, the investment is done one-time in a lump sum amount. The pension starts as soon as the investment is done.

  • Pension Plan with/without life cover: Pension plans with life-cover offer a sum assured to the nominee upon the untimely death of the policyholder during the ULIP tenure. Immediate annuity pension plans are Pension ULIPs that do not offer life-cover.

How does Retirement ULIP work?

Pension ULIPs work differently from normal pension plans or investment options. Here, the ULIP investment that you make in the form of the premium is accumulated until your retirement. A part of this investment, (generally one-third) is paid back to the ULIP policyholder at the time of his/her retirement. The remaining amount is invested in an annuity scheme, the returns on which are paid to the policyholder as pension either monthly, quarterly or annually.

Types of Fund Options for a Pension ULIP

You can choose to invest in the following fund options under your Pension ULIPs:

  • High-risk funds: Equity funds are generally high-risk funds. However, they do promise high-returns on investment.

  • Low-risk funds: These funds are generally cash or bank deposits that have a low-risk profile for investment.

  • Moderate Risk Funds: Moderate risk funds are generally government securities and corporate bonds that offer a medium risk profile.

Benefits of investing in retirement ULIPs

  • Extra financial cushion post-retirement: No matter how much saving you have made during your professional life or how much pension you are eligible for post-retirement, it always helps to have an extra financial cushion in the face of the growing inflation. Bajaj ULIP Plans offer such financial cushion upon retirement.

  • Additional Medical Riders: Retirement time calls for extra medical expenses for people. People in their old-age are prone to a number of medical conditions and the amount required for covering these medical expenses can prove burdensome in the retired life. However, some insurance providers offer additional medical riders with their ULIP pension plans that take care of these expenses.

  • Tax Benefits: Even though your monthly source of income stops after retirement, you might still be liable to pay certain tax on your investments, fixed-deposit returns, rents or any other alternate source of income. However, ULIP returns are exempted from tax under the Insurance Act. Moreover, the premium you will be paying throughout your professional life for these pension plans are also exempted under Section 80 C of the Income Tax Act. This is the ULIP tax benefits you will receive.

  • Opportunity to fulfill your future goals: Most individuals have some dreams and goals for their retired life. Be it traveling to their dream destination or buying a retirement home, these pension plans can help fulfill all your long-cherished dreams.

ULIP calculator

The sooner you start your pension plan, the sooner you can enjoy the ULIP benefitsIn order to estimate how much returns you can enjoy on your investment as well as the pension amount you are eligible for, you can take the help of an online ULIP Calculator. All you will have to do is submit your personal details such as present age, age of retirement, current income, expected income growth rate, current savings, monthly expenses, etc. to estimate the ULIP returns upon retirement.

General FAQs

Q. What is the minimum eligibility of ULIP pension plan?

A. Different insurance providers have a minimum and maximum age limit for a policyholder to buy a Pension ULIP.

Q. What documents are required to buy a Pension ULIP?

A. At the time of buying a Pension ULIP, one needs to submit the documents for-

  • Identity Proof

  • Address Proof

  • Age Proof

  • Employment Proof

Q. Are the pensions provided under ULIP Pension subject to tax exemptions?

A. According to the Income Tax Act of 1961, any investment that you make under ULIPs are subject to tax exemptions. The premium paid on Pension ULIPs is subject to tax exemptions under Section 80 C of the Income Tax Act. Similarly, the fund that you get at the time of maturity is also exempted from tax under Section 10 (10D).  

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