Pension Plans

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  • Immediate Annuity Plans Option
  • Guaranteed Pension/Income
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What is a Pension Plan?

Pension plans (popularly known as retirement plans) allow the individuals to transfer a part of their income towards their retirement benefits. The main motive of a pension plan is to get a regular income during post-retirement days so that a person can continue to live the basic standard of living.

What is The Eligibility of a Pension Plan?

The main eligibility criteria to invest in the pension plan is mentioned below-

Entry Age: The pension plans' entry age varies from insurer to insurer. Some plans are available with an entry age of minimum 18 years, whereas some plans allow you to start investing at the age of 30 years. Similarly, the maximum age varies depending on the insurer to insurer, but the most common one is 70 years.

Vesting Age: This is the age when the policyholder starts getting the pension. Generally, it is 40 years but that varies from plan to plan and company to company.

What Are The Different Types of Pension Plans in India?

In India, there are several forms of pension plans like a deferred annuity, life annuity, immediate annuity, and much more. However, Deferred Annuity and Immediate Annuity are the most common plans that people usually go for.

Let's take a look at the types of pension plans in detail.

Deferred Annuity

A deferred pension scheme allows you to accumulate a corpus through normal charges or a single premium over a policy term. After the coverage term is over, the pension will start. The advantages of deferred pension plans are huge and include tax benefits, which can be associated with this pension scheme. The plan suits all sorts of buyers- individuals who need to make investments systematically and people who have a bit of cash to make investments.

Immediate Annuity

Under an immediate annuity scheme, pension starts right away. One has to deposit a lump sum quantity and the pension will begin immediately. After the loss of life of the concerned person, his/her nominee is entitled to get the money. You could choose your annuity from distinctive annuity payout options. Moreover, you may enjoy tax benefits on the premiums paid as per Indian tax laws.

Annuity Certain

An annuity is paid to the annuitant for the specific tenure. The annuitant can choose the tenure period and if (s)he dies earlier than the payment term ends, the money will be paid to the beneficiary.

Guaranteed Annuity

As in line with this annuity choice, the annuity is given for regular intervals like 5,10,15 or 20 years, whether or not the person survives that tenure.

Life Annuity

As consistent with this annuity alternative, the pension amount can be paid to the annuitant till demise. If the annuitant chooses "with partner" alternative, then after the demise of the annuitant, the pension can be paid to the partner/spouse.

National Pension Scheme (NPS)

The National Pension scheme has been developed by the government for people looking to build up pension amounts. NPS is transparent and cost-effective, wherein the pension contributions are invested in the pension fund schemes. You may withdraw 60% of quantity at retirement and relaxation of 40% must be used to buy an annuity.

Pension Funds

Pension funds are an awesome way to build up a corpus amount. They are meant for the long-term and as a result, they pay better. Pension Fund Regulatory and Development Authority (PFRDA) has allowed 6 corporations as fund managers.

Unit Linked Pension Plan

ULIPs are market-linked pension products. They are suitable for individuals seeking a long-term retirement plan that doubles up as an investment.

What Are The Features & Benefits of Pension Plans?

Guaranteed Pension/Income

Investment in pension plans guarantees a steady flow of income after retirement. However, the income will depend upon your investment.

Tax Efficiency

Pension plans are liable to get tax benefits under section 80C. If you want to contribute to pension plans, the Income Tax Act, 1961, offers significant tax respite under Chapter VI-A (Section 80C, 80CCC and 80CCD). For example, Atal Pension Yojana (APY) and National Pension Scheme (NPS) are subject to tax deduction under 80CCD.

Long Term Savings

Retirement or pension plan is a long term savings scheme. It assures savings for a long tenure. It helps you with an annuity that you can invest further to generate a steady flow of income.

Top Features Of Pension Plan

Save For Medical Emergencies

A medical emergency during post-retirement days can create a big hole in your pockets. Having an adequate pension plan can help you in dealing with such unwanted expenses easily.

Insurance Cover

Most of the insurance companies offer insurance cover along with the basic retirement plans so that the family does not have to suffer in case of an unfortunate demise of the insured.

No-risk Investment

Pension plans assist you with the coverage against several investment risks. These plans are considered as savings plans. Hence, there is no risk involved in the same.

Best Pension Plans in India 2020

Plans

Entry Age

Policy Term

Annual Premium Amount

Sum Assured

Aditya Birla Sunlife Empower Plan

25-70 years

5-30 years

Rs.18000

N/A

Bajaj Lifelong Goal Plan

18-65 years

10-25 years

Rs.25000 (minimum)

10 times the annualized premium

Edelweiss Tokio Life Wealth Ultima

0-70 years

10-100 years minus entry age

Rs.48000 (minimum)

10 times the annual premium

or

policy term / 2 X Annual premium

Canara HSBC Invest 4G Plan

18 years (minimum)

5-30 years

Rs.50000

N/A

**Last Updated on 27-08-2020

*The values may change as per chosen plan options.

Apart from the above-stated plans, we have prepared a detailed list of the top 10 pension insurance plans in India 2020.

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What Factors Should Be Considered To Invest in a Pension Plan?

  • Monthly Expenses: When it comes to retirement planning, it is advisable to keep your monthly expenses in mind. During the post-retirement days, the regular income or monthly income is cut off. Hence, to keep up with the regular income, it is important to create a big corpus that is adequate enough to take care of all of your expenses.
  • Inflation: Don't forget the growing inflation rate and plan according to the same. Keep an eye on it to maintain sufficient funds for a secured lifestyle after retirement.
  • Identify The Risk And Your Financial Needs: You need to check your risk appetite and search for the plan accordingly. Apart from this, understand your financial needs for a secure future.
  • Research: Before zeroing on a pension plan, do your research properly. Check what you are signing up for.
  • Comparison: Compare and choose the adequate one among the best pension plans that can go well with your requirements.
  • Check The Reviews: Check the reviews of the plan offered by the insurance company along with the company's reputation.
  • Check For Deductions: Check the fees and deductions that may be applicable to the surrendering system. Basically, it's chargeable when you surrender the plan before the maturity time (in case of emergencies).

How Do Pension Plans Work?

Let's assume that you are a 32-year-old healthy person who is earning Rs.50,000 per month. If the expected lifespan is around 80 years and you are looking forward to retiring at 60 years, then how much should you invest monthly for your retirement to get a monthly income of Rs.50,000 during the post-retirement period?

Let's consider the inflation rate at 6%. You have to build a corpus of Rs 7.15 crore to get Rs.50,000 as a monthly income after retirement. If you plan to buy a ULIP and the returns until the age of 60 is 12% and 5% (after retirement), you have to invest around Rs.26,000 monthly to reach the desired target.

If you start investing at 30, the monthly investments will be around Rs.20,000. This is the advantage of investing in a pension plan at an early age. Moreover, if you are not good at manual calculation, then you can take the help of a Pension Calculator.

When Should You Start Retirement Planning?

The simple answer is as soon as possible. Ideally, you should start saving for your retirement in your 20s, when you start earning your paychecks. That's because the sooner you begin saving, the more time you will get to collect adequate funds.

Let's understand the same with an example. You start investing at the age of 25 and keep aside Rs.3000/year to invest in a tax-deferred retirement account. By the time you reach 65, your Rs.3000 investment will grow at least Rs.3,38,000 (assuming a 7% annual return).

How To Buy Pension Plans?

You can log on to PolicyX.com to buy a pension plan. Below are the steps-

  • Find 'Free Quotes From Top Companies' given at the top-right corner of this page.
  • Provide basic details such as DOB, annual income, gender, etc.
  • Click on the tab 'Continue'.
  • Provide your phone number, name, and city.
  • Click on the tab 'Proceed'.
  • Check the available quotes from the top insurance companies in India.
  • Choose the desired plan and tap on ''Invest' at the right corner of the chosen plan.
  • Click on the tab 'Proceed to Buy'.
  • Enter your 'Email id' and click on the tab 'Submit'.
  • It will take you to the company's official website.
  • Make the payment using available payment options.
  • You will receive a confirmation along with the policy documents on your registered email address.

Note: In case of any query, feel free to connect on our toll-free number (1800-4200-269). You can also email us at helpdesk@policyx.com.

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Documents Required To Buy Pension Plans

  • Age proof - Birth Certificate, 10th or 12th mark sheet, Driving License, Passport or Voter ID.
  • Identity proof - Driving License, Passport, Voter ID, PAN Card or Aadhar Card, which proves one's citizenship.
  • Address proof - Electricity Bill, Telephone Bill, Ration Card, Driving License or Passport should mention the permanent address.
  • Income Proof - Salary slip, Form 16 or Employer's certificate.
  • Proposal Form - Duly filled in the proposal form is required
  • Medical Tests - Some companies may require medical check-up to make sure that the insured does not suffer from any chronic illness.

FAQs

1. I already have a PF account. Do I still need a pension plan?

Yes, with the growing inflation and healthcare cost, your PF corpus might not be liable to deal with your needs after retirement. As a thumb rule, an individual should have investments (assuming retirement age to be 58-60), which are 100 times of the last drawn monthly salary. However, it is important to do proper calculations before investing in a pension plan.

2. Is it possible to make an early withdrawal from my pension plan?

Yes, it is possible to make an early withdrawal from your pension plan. But there are a few government limitations that you must check before making withdrawals.

3. Which pension plan should I opt- Traditional or ULIP?

If you are planning for a secure and wealthy post-retirement life, it is advisable to opt for a ULIP based pension plan as the premiums are invested in equity markets and have a good return on investment.

4. I am planning to get a pension plan, how can I pay premiums online?

If your provider has an online payment facility, there are many options to pay premiums online such as Credit Card, Debit Card, Net Banking, Wallets, and more.

5. What is the best pension plan to start investing in India?

If you are not a government employee, you can prefer the top pension plans provided by the insurance companies. There are multiple retirement plans, where you can check your eligibility and check premiums to get the monthly dividends. Compare the pension plans, and you will find plans with a minimum of Rs.10,000 or, you can find an agent for the same.

6. How can I calculate the value of my existing pension plan?

You can go to your employer where you work to get the information. With your yearly statement, you can understand the value of your pension plan. Depending on the lump sum amount, it can take the help of a legal agent if possible.

7. I am in a private company, but I want to invest in NPS. Is it a good decision?

Yes. NPS is among the most trusted and beneficial income for people working in a private job and needs a pension when they retire. You will get benefits from the equity market, easy withdrawal and a tax break of Rs. 50,000/year (over and above the 80C limit). Make sure you check all the details on its official website before making a decision.

8. What is required to register for a pension plan?

If you are registering for NPS, you need to submit your KYC documents and a filled up NPS form with copies of your Identity Proof, Residence Proof, Aadhar Card, Voter ID, Driving License, Utility Bills and passport size pictures (application.) Once verified, you will be able to sign up for your NPS account. This goes the same for a private pension scheme.

Last updated on 27-08-2020