Money is supreme power these days, which is needed at every stage of life. While a person is young and has the energy, intellect, and competency to work, he can earn money. But when the same person’s age, his expertise, and capacity to work diminishes, thus affecting his power to earn a regular income, this is his retirement age. While the individual is still financially independent, he must save for these days when he will be out of work and without income. He would need to maintain his lifestyle, keep a surplus for medical emergencies and take care of his retirement period without being financially dependent on anyone else. All this needs a specific investment to be created from the regular source of the person's income.
Thus, we all need to plan for our retirement accordingly.
- First and the foremost factor is that it should be a long term retirement planning
- Anyone trying to save for his later years of life can start by investing small amounts in his initial years of employment or business
He can save through:
- Fixed Deposits
- Mutual Funds
- Real Estate
- Public Provident Fund
- Life insurance plans
- Pension and Retirement Plans
Let us quickly compare a few Retirement and Pension options:*Standard T&C Apply.
|Features||Whole Life ULIP||Regular Pension Plans||NPS - National Pension Scheme||PPF - Public Provident Fund|
|Tax-Free Income till retirement||Yes||No||No||No|
|Tax-Free Fund Value (withdrawal)||Yes||No||No||Yes|
|Tax Exemptions||Up to Rs. 1.50 Lakh u/s 80C||Up to Rs. 1.50 Lakh u/s 80C||Up to Rs. 50000 u/s 80CCD(1B)||Up to Rs. 1.50 Lakh u/s 80C|
|Flexibility to draw the Fund Value fully at any point of time||Yes||No||No||No|
|Flexibility to enhance or mitigate the Pension Amount||Yes||No||No||No|
|To maximise returns, choice of multiple investment opportunities and strategies provided.||Yes||No||Yes||No|
*Tax benefit is subject to changes in tax laws.
What is a Pension Plan?
Pension plans are retirement plans which need to be accumulated and invested in, during the prime days of a person’s life that is when he has a stable source of earning income. The applicant can choose from a myriad of designated pension plans in India and invest in one to meet the financial crunches of retired life.
Certain factors need to be considered before buying a pension plan. Inflation is a key area that cannot be ignored, medical inconsistencies looking at the age, debts, and loans which the person may have taken during his lifetime and has not been able to pay off, maintain his lifestyle, and not burden his family with his responsibility.
Investing in a lucrative pension plan will help and support the individual when the income ceases, but the expenditures don't
There are two stages of the Pension Plans:
Accumulation Stage - This is the stage when the individual pays all his premiums from his regular income and saves for the rainy days.
Vesting Stage - This is when the investor reaches his retirement age when he will start receiving the benefits and annuities of his savings, either for a specified period or until his death.
Salient Features of Pension Plans
*Standard T&C Apply
Pension Plans come packed with a wide range of key features. They are as follows:
Guaranteed Pension or Income on Retirement
There are two kinds of maturity plans under the Pension Plans namely, Deferred Plans and Immediate Plans. When the retired individual gets a fixed income after he retires, then it can be termed as a Deferred Plan. If the returns start immediately after investment, then the income will come under an immediate plan. There are several factors to consider before investing like inflation, long-term goals, family security, maintenance of lifestyle, medical contingencies, etc.
This is many times confused with the accumulation period. Many comprehend the payment period to be the same amount of time that the pension fund needs to be included For example on buying a pension plan, if the terms and conditions state that the Payment period is 15 years, this does not signify that the investor will have to pay towards his pension fund only for 15 years. This means that the monthly payment after the applicant retires, for example, he retires at 60, and then the payment period will be between 60 to 75 years (15 years). The accumulation period allows certain benefits like partial or full withdrawal of the accumulated fund.
An investor can either choose to pay the premium in periodic intervals or at once as a lump sum investment. The earlier in life, an investor starts saving, the bigger will be his accumulation benefit, which means the amount of investment plus gains. Let's say a person starts saving at the age of 25 and retires at 60, so the accumulation duration will be 35 years which can be a good enough period to create wealth.
The value of the currency and money is much lower than what it will be 20 to 30 years down the line. That also means whatever we are saving today, may not be good enough for us when we retire. So, Pension Plans must consider inflation which the good ones do. Only then, can today's investment measure up to tomorrow's retirement period and thus provide a beneficial corpus? Thus, a beneficial pension plan will surely consider inflation.
Retirement plans generally generate low liquidity. There are pension plans that allow withdrawals even during the term of the plan, but some induce a lock-in period because of which the investor can't retrieve his funds mid-term. Because of this, the fund holds no good in case of emergencies. Thus, liquidity is a major criterion that should be included in the pension plans.
If the investor surrenders the pension plan before its maturity, he may lose out on the sum assured and the entire coverage of life insurance. Thus, it is not recommended to leave the plan mid-way, and it is suggested to continue with the pension plan to retain the benefits.
Many pension plans provide tax deduction benefit under section 80C or as under Chapter VI-A and Section 80C, Section 80CCC and 80CCD of the Indian Income Tax Act, 1961. Schemes like the Atal Pension Yojana (APY) and National Pension Scheme (NPS) give out tax exemption benefits under Section 80CCD. *Tax benefit is subject to changes in tax laws.
This is the age when the investor starts getting the benefits of retirement benefits. It can start from the age of 45, which is permitted by many of the pension plans and can go up to the age of 50 years. The maximum vesting age can go up to 90 years.
Core Benefits of Pension Plans
Here is a rundown to the key benefits offered under different pension plans:
Savings for a Long Term
Pension Plans encourage the investors to make long term savings which can be utilised at the time when the person retires, and he has no source of income. The savings done during the prime working years of his life will help him survive peacefully during the later years of life and help him deal with medical and financial emergencies.
Money Ready when you need it
All Pension Plans don’t come with a lock-in period which means at any point of time or any stage if the investor feels he need to break the retirement fund, he can withdraw the plan and use the money for his emergency cases. Besides withdrawing the plan, there are many plans, which offer the investor to avail loans after maintaining a three-year-long relationship with him.
Different Plans for Different Individuals
There are various kinds of retirement, and Pension Plans one can invest based on their long term goals, income, and age, and gender, medical and financial conditions. The investor must be thorough in his research and choose the *best plan that is more suitable to his personal needs and invest in the same. *PaisaWiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Option to enhance the Protection
There are additional paid coverage and riders that are available to merge with the Pension Plans which gives them additional benefits like critical illness, accidental death or disability etc. This comes with an extra premium payment but is quite beneficial if bought along with the Pension Plans.
Unit Linked Insurance Plans are a dual benefit plan of investment and retirement investment. These are long term investments wherein the investors’ money is invested in equity and debt funds or even safer government securities. Based on the high returns, the retirement corpus can be good enough to lead a good retirement life without making any compromises.
Regular Income after Retirement
Considering the rate of inflation and the current income, out of which a retirement fund can be created, this enables the investor to enjoy monthly pension income and day to day expenses.
Along with retirement, there are many pension plans which offer the dual benefit of retirement and insurance. This means in case of the sudden death of the policyholder; the maturity benefits will be paid out to his nominee, or spouse or other family members as applicable so as the cover insurance along with investment benefits.
A Government Entity the Pension Benefit Guarantee Corporation takes care of the pension schemes of the investors, so it is not affected by the bankruptcy of companies or by the crash of stock markets. The fund is safe and is without any risk. So, the investor can blindly trust the pension plans to cater to his retirement needs.
Annuity plans that are Immediate pay incomes that are guaranteed to meet expenses post-retirement. These annuity plans which are immediate pay annuities for the investor and his nominee. In contrast, the deferred annuity plans give him one-third of the retirement fund as cash on the maturity of the plan.*Standard T&C Apply
Best Pension Plans in India
|Pension Plan||Age of Entry||Vesting Age||Term of the Policy||Annual Amount of Premium||Basic Sum Assured|
|Pension Plan - Aditya BirlaEmpower Sunlife||25 to 70 years||80||5 to 30 age||Rs. 18000||Not Applicable|
|Guaranteed Income Aegon Life - Advantage Plan||20 to 55 years||85||85 years of age deducting the age of entry||The amount depends on coverage, age, premium payment tenure and term.||Minimum - Rs. one lakh Maximum - Not Applicable|
|Aviva Next Innings Plan||42 to 60 years||Not Applicable||13, 16, 18 years||Rs. 50000 for limited pay and Rs. 1.5 lakh for single pay||Not Applicable|
|Bajaj Lifelong Goal Scheme||18 to 65 years||99 years||99 - entry age||Minimum - Rs. 60000||Not Applicable|
|Canara HSBC Invest 4G Whole Life Plan||18 to 55 years||Not Applicable||Not Applicable||Not Applicable||If age is less than 45, then 10 times annualised premium.0.5*Term*Annualized Premium If age is more than 45, then 10 times annualised premium0.25*Term*Annualized Premium|
|DHFL Pramerica Golden Age Plus||18 to 40, 45 or 50 years||Not Applicable||15, 20, 25 years||Rs. 10800||Minimum - Rs. 1.5 lakhs Maximum - Rs. 5 crores.|
|Edelweiss Tokio Life Wealth Ultima Plan||18 to 55 years - with Little champs’ benefits and 18 years to 60 years - without Little champs’ benefits||18- 100 years||Minimum - 10 years Maximum:For 5-6 PPT - 70 years For 7 PPT - above 100 minus age of the policyholder at the time of entry.||Rs. 48000||Depends on Age and other factors|
|Exide Life Golden years Retirement Plan||18 to 65 years||55- 75 years||10 to 42 years||Rs. 24000||Not Applicable|
|Future Generali - Big Dreams Pension Plan||18 to 75 years||Not Applicable||5 to 20 years||Rs. 60000||Regular Pay - 10 times the annualised premium Limited Pay - 10 times the annualised premium Single Pay - 1.25 * Single premium|
|HDFC Life Click 2 Retire||18 to 65 years||75 years||10, 15 - 35 years||Rs. 24000||Not Applicable|
|HDFC Life Pension Super Plus||35 to 65 years||55 - 75 years||10 to 20 years||Not Applicable||Subject to terms and conditions|
|HDFC Life Personal Pension Plus Plan||18 to 65 years||55 - 75 years||10 to 40 years||Equal to the term of the policy||Minimum - Rs. 204841 Maximum - depends on term, age and premium amount|
|ICICI Pru easy Retire Pension Scheme||35 to 70 years||45 - 80 years||10 to 30 years||Rs. 48000||Not Applicable|
|India First Annuity Plan||40 to 80 years||Not Applicable||Not Applicable||Rs. 50000||Not Applicable|
|Kotak Premier Pension Plan||30 to 55 or 60 years||45 - 70 years||10, 15, 17 - 30 years||Depends on age term of the policy, coverage and tenure of payment of premium||Minimum - Rs. 2 lakhs Maximum - No Limit|
|LIC New Jeevan Akshay Pension Plan||30 to 85 years||Not Applicable||Not Applicable||Depends on age term of the policy, coverage and tenure of payment of premium||Not Applicable|
|Max Life Forever Young Pension Plan||30 to 65 years||50 - 75 years||10 to 75 years||Regular Pay - Rs. 25000 Single Pay - Rs. 1 lakh||Not Applicable|
|Max Life Online Savings Plan||50 to 75 years||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
|PNB Metlife Monthly Income Plan - 10 Pay||18 to 55 years||Not Applicable||10 years||Rs. 23280||11 times the annualised paid premium|
|Reliance Immediate Annuity Plan||20 to 80 years||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
|SBI Life Saral Pension Plan||18 to 60/65 years||40 - 70 years||Regular Pay - 10 to 40 years Single Pay - 5 to 40 years||Rs. 7500||Minimum - Rs. 1 lakh Maximum - No Limit|
|Shriram Immediate Annuity Plan||40 to 75 years||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
|Star Union Dai-ichi's Life Assured Income Plan||8 to 55 years||Not Applicable||20 to 35 years||Rs. 24000||Not Applicable|
|TATA AIA Life Easy Retire||21 to 80 years||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
*PaisaWiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. **Standard T&C Apply
Types of Pension Plans
There are a variety of Pension Plans with classifications and features depending on the benefits and structure of the plan bought. They can further be categorised into the following:
|SL No.||Plan Type||Features|
|1||Deferred Annuity||In a deferred annuity, a systematic premium or a lump-sum amount is invested over tenure or even a monthly premium based plan for a fixed duration. Annuity payment begins after a specific tenure andPension begins after completing the term. Unless the corpus has been withdrawn, there is no taxation.|
|2||Immediate Annuity||After buying the plan, only lump-sum investment is allowed, and a consistent monthly income is paid out immediately and is guaranteed for the life term. Pension begins immediately after investment. In case of the demise of the policyholder, the nominee can claim the amount of pension Premium amount is exempted from tax.|
|3||Annuity Certain||Under this plan, the benefits of pension are paid out for a specific period and a specified number of years.The policyholder can choose a period, and in case he dies before he has received the entire payment, then the remaining amount will be paid to his nominee|
|4||With Cover and Without Cover Pension Plans||Pension plans with cover - In this option the family members or nominee are entitled to a lump-sum amount in case of the death of the policyholder. This is to ensure their security and safety. Example - deferred plans. The without-cover does not have life coverage. The amount is not large and only the premium accumulated forms the corpus which is then paid out to the nominee or family members of the policyholder in case of his demise. Example - immediate annuity plan.|
|5||Life Annuity||Under this scheme, the pension is paid out to the applicant till death. In case of the policyholder’s death and if he had taken the ‘With spouse’ option, then his/ her spouse will continue to receive the pension benefits after the policyholder’s demise|
|6||National Pension Scheme (NPS)||NPS is introduced by the Indian Government so that the retirement of the individual is secured. The applicant contributes his savings from his income towards this scheme, and it is further invested in debt funds and equity. This generates a good return on investment. 60% of the amount can be withdrawn at the time of retirement, and the remaining 40% is used for annuity purchase. But in this case, tax benefits are not applied to the maturity amount.|
|7||Pension Funds||These Pension Funds are regulated by PFRDA - Pension Fund Regulatory & Development Authority, a government body that offers great returns on investment once it matures. There are currently six fund houses in India which are approved to offer and sanction pension funds.|
|8||Guaranteed Period Annuity Plan||Under this plan, irrespective of the fact that the applicant is alive or not, the pension is paid out to the policyholder for specified terms like 5-10 -15 and 20 years.|
|9||Whole Life ULIPs||These are investment plus retirement plans in which the finances invested are for the entire life. On retirement, the applicant can withdraw partially from this account and get tax benefits on the income earned. Withdrawal benefits are also permitted as and when there is a need for funds.|
|10||Defined Benefits||A specified amount is paid by the applicant for retirement to ensure income to be earned for life. The amount of pension is decided on factors like the tenure the employee has spent with the employer and his total income earned from the service. Through this plan, both the employee and the employer can contribute. It is the responsibility of the employer to pay and to ensure that there is enough money to pay the benefits to all members and employees. If there is a lack of required money or funds, the difference is supposed to be paid by the employer.|
|11||Defined Contribution||In this case, contributions made towards the plan are guaranteed and not the income on retirement. Through this plan, both the employee and the employer can contribute. The applicant is responsible for developing his funds to meet his financial commitments. The retirement fund comprises of all contributions made by both the parties plus the cash earned through investment returns. At the time of retirement, cash in record needs to be utilised to ensure remuneration for retirement.|
Tax Benefits of Investing in Pension Plans
Any premiums paid towards Pension Plans or contributions that have been invested by an individual towards their retirement funds are exempt from Tax to a maximum limit of Rs. 1.5 lakhs, as stated under section 80CCC of the Indian Income Tax Act, 161.
Features or Conditions to be eligible for the Tax Deductions
The key features and conditions one needs to fulfil in order to qualify for the tax deductions are as follows:
- Any amount that is spent on the purchase or renewal of Pension Plans comes under the exempted amount
- Both citizens and Non Residents of India can be covered for these exemptions. Hindu Undivided Family - HUF will not be considered for this benefit
- Any withdrawal made from these pensions plans and pension funds is not tax-free
- After the policyholder reaches the retirement age, only a third of the entire fund that is paid out to the applicant is free and exempt from tax. The remaining amount is considered as an annuity and is distributed, but is not tax-free; it is subject to taxation. The amount deducted as a tax depends on the rate of tax at the time of retirement of the policyholder
*Tax benefit is subject to changes in tax laws.
How to Compare Pension Plans?
Before buying a Pension Plan and making investments for retirement, it is important to compare different pension plans available in the market and compare various factors before investing. The individual must consider the following factors before investing:
Minimum and Maximum Investment Amount
The most important parameter is to check your individual budget first. Depending on the income that one earns, after deducting expenses and a few savings, the reaming amount should be invested for retirement. So, the exact amount to be contributed should be decided based on all the above factors.
Return on Investments
This is one of the most important criteria to consider. One must investigate all the factors of returns that can be earned on investing in a valid pension plan. The investor must always consider the relationship between risks and return on investment. The higher the risk and the lower will be the returns. Rate of return will always be lower if the returns are guaranteed.
There are pension plans that offer no flexibility, and the money invested is under a lock-in period of a few minimum years. These are not very viable plans as in case of emergency; the funds are closed and unavailable. It is always better to look for plans which offer flexibility, viability and liquidity. They should give the facility of withdrawing funds in case of financial emergencies without compromising on the benefits of the plan.
Mixed with Investment
While investing for Pension and Retirement funds, one can easily merge the investment factor within the same funds. These come in the form of mutual funds which solve the dual purpose of investment and retirement benefits. So, a pension plan that offers both the benefits must be chosen.
Pension and Retirement Plans have the benefit of tax exemptions under many forms under different conditions as specified under section 80- C, 80CC and 80 CCD under chapter VI-A of the Income Tax Act, 1961. This is a huge investment that can be availed by investing in Pension Plans in India. *Tax benefit is subject to changes in tax laws.
Tax Exemption of the Interest earned or Dividend Received
Besides tax exemptions on the premium paid towards investment in Pension Plans, there are other exemptions on the amount of interest earned or the amount of dividend received which the applicant receives in the entire tenure of investing in Pension Plans. But many of the Plans available in the market are not applicable for tax exemptions on these amounts. So, the policyholder needs to search for the best pension plans which provide this benefit to the applicant. *Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. *Tax benefit is subject to changes in tax laws.
Inflation should be considered
Common factors while buying Pension Plans are age, duration, the sum assured, tenure of the plan, but the most important factor in inflation that cannot be ignored. The policyholder needs to keep a tap on the inflation factor to keep up with the lifestyle of his family too before investing so that the same can be maintained in case of his unfortunate demise. Whatever the policyholder makes an investment, it should be keeping the rice rise and future expenses. The value of the currency and inflation factor cannot be ignored before investing valuable funds today.
Complimentary with your Current Savings and Income
The risk and return factor surely need to be considered before investing in conservative pension plans. The amount to be invested should be complementary with the income earned, expenses incurred, savings and other emergency expenses.
Flexibility in Increasing or Decreasing the Amount to be Invested
Many people start investing in a Pension Plan with a small amount depending on the income. As the income increases, many people would want to enhance the pension fund too. Similarly, many may think of reducing the amount if there is any kind of recession or financial emergency. The flexibility of increasing and decreasing the amount to be invested for Pension Plan and Investments should be available in a good plan.
Timing of Investment
The correct timing depends on what stage the investor thinks of investing in the Pension Plan. If he starts at an early stage of his career when the income is also not that high, then he can go for the deferred annuity plan. This enables regular payments towards the pension funds to accumulate a good plan for retirement. Similarly, the immediate annuity plan can be invested in if the annuity payments should be started with immediate effect. This made possible in cases when a lump-sum retirement benefit like provident fund or gratuity is provided to the investor.
An annuity plan can cover a single individual or the whole family. Under this plan, coverage can be provided to another person who would continue to receive regular annuity payments for a lifetime. In a joint-life annuity, the benefit of the pay-out is first paid to the policyholder, and after his/her death, the spouse of the insured continues to receive the annuity payments. Hence if you want to cover your spouse as well, you can opt for joint-life annuity so that they receive payment even after your death.
If the Pension amount is fixed, which is either guaranteed or not-guaranteed, then it is fixed annuity. A person who wants lower risk may choose fixed annuity where returns are lower.
If the amount of annuity differs based on the performance of the investments, in that case, it’s a variable annuity. People who have a greater appetite for risk, variable annuities are for them, which have higher returns.
Many other benefits and options need to be considered before investing your hard-earned money into Pension Plans like:
- Monthly Expenses
- Life Expectancy
- Medical Expenses
- Assets and Loans
- Understanding your own financial needs
- Understand different products
- Know about other retirement options
Eligibility for Retirement Plans
The main factors to be considered before investing in a Pension Plan are:
There are a certain minimum and maximum entry age for investing in Pension Plans. Most of these plans can start from 18 years of age onwards, and the maximum age can go up to 70 years. Many plans can also be initiated at middle age like 30 or 35. But the sooner the pension plan is invested, the higher will be the pension fund.
The Pension Fund depends on the kind and amount of premiums deposited by the investor. The policyholder can make monthly, quarterly, bi-annual or annual payments of premiums which will be further accumulated towards the Pension Funds.
This is the age when the investor wants to start receiving this Pension amount from the fund. The minimum vesting age is 40 years in India, but it can go up to 60-65 years also. Many people prefer to work till late in their lives, and many want to retire early and enjoy the benefits of Pension early.
How to Calculate Return of Pension Scheme?
It is imperative to calculate the returns expected from investing strategically in retirement and creating a good pension corpus. This is how one can calculate the return on investments in Pension Plans:
- The investor can use the online pension calculator to calculate the returns of Pension Plans
- He would need to enter vital information like his Income, savings, age, monthly expenditure, current financial liabilities, and the total sum required or expected on retirement
- After putting in the relevant information, the pension calculator will come up with the amount of the expected returns on investment
How to Buy Pension Plans?
Pension Plans can be bought offline and online. Through agents, brokers and mediators, an offline pension plan can be bought.
Online Pension Plans can be bought through official websites or www.paisawiki.com. Below are the steps that need to be followed for the purchase of these Plans:
Step 1 - The applicant needs to visit the official website and click on “Get Quotes” from the Pension Plans Tab.
Step 2 - The applicant needs to enter basic information like his name, date of birth, gender, annual income etc.
Step 3 - Then, he will click on the 'Continue' button.
Step 4 - The he must enter other personal details like phone number, email id, address, city and state.
Step 5 - Then he must click on ‘Proceed’.
Step 6 - Now, he will get the top companies or government plans with their available quotes. The applicant can take his time and study which one is most suitable for him as per his feasibility.
Step 7 - Then, he needs to click on the desired plan and click on invest from the right corner of the page.
Step 8 - Then he must click on 'Proceed to buy.'
Step 9 - After clicking of the buy button, he would need to re-enter his email Id and click on Proceed again.
Step 10 - The page will direct the applicant to the company’s official website and page.
Step 11 - The payment needs to be made using his debit, credit card or using his mobile or Net Banking details.
Step 12 - A confirmation about the same, after the payment has been made will be directly sent to the applicant’s email id and the policy documents and plan confirmation details will be mailed to his official address.
Documents Required to buy Pension Plans
Here is the list of documents that are required to make investments in Pension Plans in India:
Utility Bills like electricity and phone bills
X or XII Marksheet
Income Tax Return Files
Voter ID Card
Voter ID Card
Other Retirement and Pension Plans
Apart from the aforementioned plans, there are other retirement and pension plans. They are described below:
National Pension System (NPS)
*Standard T&C Apply
National Pensions Scheme is controlled by PFRDA (Pension Fund Regulatory and Development Authority of India) which is an investment plan backed by the government of India.
Salient Features of National Pension System
*Standard T&C Apply
Here is a rundown to the key features offered under the National Pension System (NPS):
- It is a great opportunity for the public investing for planning long term and retirement based objectives
- Approximately 50-75% of the funds invested are in debts and equity
- The interest earned is added on as an accumulated fund to the main pension budget, later which is paid out when the applicant retires, which is normally when he is 60, 65 or 70 years old
- Risk and Returns are directly proportional to each other. Higher the risks, better will be the return on investment
- Eligibility Criteria is for people who are between the age group of 18 - 65
- Individuals can take out a partial amount of 25% after he has completed and maintained a relationship with NPS for a minimum of 3 years
- Tax benefits of Rs. 50000 u/s 80CD(1B) is available to investors from investing in NPS investments
*Tax benefit is subject to changes in tax laws.
Senior Citizens Saving Scheme
*Standard T&C Apply
This is a great scheme initiated for senior citizens who are more than 60 years old. They need to invest diligently in their SCSS account for a minimum of 5 years and can earn lucrative benefits in the form of interest and a great retirement fund.
Salient features of the Senior Citizen Savings Scheme
Here are the key features offered by the Senior Citizen Saving Scheme Plan:
*Standard T&C Apply
- The main goal is to invest proficiently for long term goals and specifically for the period when there will be no source of income
- This encompasses a high rate of interest and benefits of tax exemptions which can go up to Rs. 1.5 Lakh u/s 80C of Indian Income Tax Act (*Tax benefit is subject to changes in tax laws)
- It can be initiated by investing through a bank (public or private) and a post office
- It can create wealth, and it is generally initiated for investing for a long period of time
- It is an investment that is inaugurated by the Government of India, and it provides consistent income, ensuring stability and safety to the investor
- Provides beneficial Tax Exemptions
Post Office Monthly Income Scheme
This is one of the *best Government initiated plans for investment through which an investor can invest a minimum of Rs. 1500 each month, for a minimum period of 5 years.
*PaisaWiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Salient Features of Post Office Monthly Income Scheme
Listed below are the salient features of the Post Office Monthly Income Scheme:
*Standard T&C Apply
- This is available to all citizens of India and does not offer tax benefits under this plan
- The investor can have his account only on his name of can open a joint account with a family member also
- These offer high returns on investment, and the risk varies from medium to high
- This is for people who want the feasibility of a monthly income but also want to avoid high risks
- This is for people who would not have the benefit of a monthly income anymore
- These investments are for long term objectives
PMVVY - Pradhan Mantri Vaya Vandana Yojana
A Pension scheme, which is specially, initiated by the Indian Government with Rs 15 Lakh as the maximum limit.
Salient Features of Pradhan Mantri Vaya Vanda Yojana (PMVVY)
PMVVY by the Government of India offers a lot of key features to the buyer of this policy. The salient features of this plan are as follows:
* Standard T&C Apply
- These can be bought online (internet-based official websites) and offline (directly from the vendor) from the Life Insurance Corporation of India -LIC
- It deals with the fluctuating rates of inflation and interest
- PMVVY is an investment plus a retirement scheme, which ensures return
- 8- 9% rate of return on investment for a minimum time period of 10 years
- It guarantees a fixed amount of fund on a regular basis
- After 10 years, the final pension (including interest) will be paid out
- A loan of 75% (up to) of the total fund amount can be requested after a period of 3 years
- 98% of the total accumulated fund can be withdrawn in case of medical emergencies
- In case of the applicant’s death, the entire fund will be paid out to the nominee
Endowment Plans are Insurance Plans, which are Non-ULIP- which comprises a dual advantage of a good lump-sum maturity amount plus the benefit of investment and savings to meet objectives that can be long-term in nature.
Salient Features of Endowment Plans
Here is a rundown to the main features of endowment plans:
* Standard T&C Apply
- It has various advantages like high returns, tax benefits, a high rate of interest as these are further invested in equity and stock markets
- In case of the death of the applicant, it provides financial safety and security to the family members
- The different kinds of endowment policies are as under:
- Unit Linked plus Endowment Plan
- Endowment with profit
- Low Cost on Endowment
- The policy of No-Profit Guaranteed Endowment Policy
*PaisaWiki does not endorse, rate or recommend any insurer or insurance product offered by an insurer.
Atal Pension Yojana
Another lucrative scheme of investment for senior citizens is Atal Pension Yojana.
Salient Features of Atal Pension Yojana
Key features of these investments are as follows:
* Standard T&C Apply.
- This is mainly for the unorganised sector focusing on public working
- This is regulated by Pension Fund Regulatory and Development Authority
- It Guarantees a systematic monthly based investment
- The minimum pension is guaranteed
- Government co-contributed for people who are not taxpayers or who are not under Statutory Social Security Schemes for 5 years
- This scheme is also available to Bank account holders
IRA - Individual Retirement arrangement
Individual Retirement Arrangement is a long term investment wherein the investors focus on equity funds. There are many ways to focus on the increase of pension funds, and the best way to invest in this is to match the portfolio with the amount to be accumulated as the pension fund or the desired outcome, tenure and the tolerance of risk within the investment.
*Lowest Premium Pension Plans in India
If you are looking to invest in the lowest premium pension plans in India, here are the best options to invest in:
|Name of the Plan||Entry Age||Vesting Age||Basic Sum Assured||Annualised amount of Premium|
|SBI Life Saral Pension Plan||18 years to 65 years||40 years - 70 years||Rs. 1 lakh - No Limit||Rs. 7500 - No Limit|
|HDFC Life - Click 2 retire||18 years to 65 years||45 years - 75 years||Subject to terms and conditions||Rs. 24000|
|HDFC Life - Assured Pension Plan||18 years to 45 years||45 years - 75 years||Depends on various factors||Depends on various factors|
|ICICI Pru - Easy retirement plans||35 years to 70 years||45 years - 80 years||Depends on various factors||Rs. 48000 to No Limit|
|Reliance - Smart Pension Plans||18 years to 65 years||45 years - 75 years||Depends on various factors||Rs. 20000 - No Limit|
|Bajaj Allianz - Pension Guarantee Plans||37 years to 80 years||99 years||Depends on various factors||Rs. 25000 to No limit|
|Max Life Guaranteed Lifetime Income Pension Plans||50 years to 80 years||Not Applicable||Depends on various factors||Rs. 1 lakh to no limit|
|Birla Sun Life Empower Pension||25 years to 70 years||When age is less than 55 years till 80 years||Depends on various factors||Rs. 18000 to no limit|
|LIC Jeevan Akshay - VI Pension Plans||30 years to 85 years||30 years - 100 years||Depends on various factors||The monthly minimum is Rs. 1000 Rs. 1.5 lakhs - no limit|
|Jeevan Nidhi Pension Plans from LIC||30 years to 60 years||30 years - 100 years||Depends on various factors||The monthly minimum is Rs. 1000 - Rs. 1.5 lakhs - Rs. 7.5 lakhs|
*Standard T&C Apply
*PaisaWiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Life Insurance Corporation Pension Plans
Here are some of the best life insurance pension plans in India, which you can choose from:
LIC’s Jeevan Shanti Plan
The plan can be a deferred annuity plan or an immediate annuity plan. Premiums are to be paid out only once - Lump-sum Premium. The investor, under this plan, gets an option of nine types of annuity payment options to choose from. If opted for a deferred annuity plan - he can be eligible for guaranteed additions in the course of the deferment phase to build up his total fund and investment corpus.
* Standard T&C Apply
Eligibility Criteria of LIC’s Jeevan Shanti Plan
The eligibility criteria of Jeevan Shanti Plan by LIC of India are as follows:
|Entry Age||30 years to 85 years|
|Deferment Period||1 year to 20 years|
|Premium to be paid||Minimum - Rs. 1.5 LakhMaximum - Unlimited|
|Amount of Annuity||Minimum - Rs. 12000Maximum - Depends on the sum assured or the amount of premium paid.|
LIC’s New Jeevan Nidhi Plan
This is a traditional deferred annuity plan with the following features:
The plan has the benefit of earning guaranteed additions and bonuses during the entire tenure of the policy. It also gives the benefit of additional coverage like LIC's Accidental Death and Disability Benefit Rider, which you purchase and availed at an extra premium. Premiums can be paid in lump-sum or on a monthly/quarterly/half-yearly or annual basis throughout the tenure of the plan. The applicant can also be eligible for premium discounts if he chooses a high sum assured and also if he pays the premiums on a bi-annual or an annual basis, for paying the premiums annually or half-yearly.
Eligibility Criteria of LIC’s New Jeevan Nidhi Plan
Here are the eligibility criteria of the New Jeevan Nidhi Plan by LIC of India:
* Standard T&C Apply
|Entry Age||20 years to 60 years|
|Deferment Period||5 years to 35 years|
|Sum Assured||Minimum - Rs. 1 LakhMaximum - Unlimited|
|Premium to be Paid||This amount depends on the total sum assured taken by the investor.|
LIC Jeevan Akshay - VI Plan
This is an annuity plan (immediate), which can be bought by paying a single premium. The key features and benefits of LIC Jeevan Akshay - VI plan are as follows:
*Standard T&C Apply
- Premium paid in a lump sum
- The pension can be received either monthly, quarterly, bi-annually or annually
- Minimum Purchase Price of Rs. 1 Lakh (offline) and Rs.1.5 Lakh (online)
- Minimum entry age - 30 years and Maximum entry age - 85 years
- Premium Paid is exempted from tax
- No medical examination required
- Minimum purchase price of Rs 1 Lakh for offline distribution channels and Rs 1.50 Lakh for online distribution channels
Pension Plan - FAQs
Ans. As instructed by the IRDA - Insurance Regulatory and Development Authority of India, it is compulsory for every Pension Plan to have a minimum guarantee and for every premium paid towards the benefits of the plan, to possess ‘on zero returns. This should not be lower than 1% of the premium paid towards the plan over the years. Although variable insurance plans offer this kind of a minimum guarantee, yet most of the companies provide numerable pension plans that may offer better returns than the guaranteed plans. This offers the best returns but varies from plan to plan. The minimum guarantee is the guaranteed amount that the policyholder will surely receive by the end of the policy period
Ans. Retirement planning means to plan investments which could be long term or short term to facilitate the retirement period of an individual that normally starts after the age when the income level is either 0 or too low. This planning is mandatory to carry on with the lifestyle of the person and to meet medical or financial emergencies at an age when the working capacity of the individual is almost nil.
Features of Retirement Planning are:
- It includes meeting financial goals, identifies income sources, opting for savings, estimating expenses during the later years of life, and managing risks and assets
- This is a lifelong process
- This should start as early as possible so that the individual can accumulate a good enough retirement fund to cater to all his expenses
- This will help in sustaining the policyholder’s life and maintain his lifestyle even when he is out of income at the time of his retirement
- There are many investment options available in which the individual can invest his income
- Advantages of Tax Exemption
- It is important to gauge factors like life expectancy, assets and income, future liabilities, and expenses
Ans. It is imperative to start with a retirement plan early in life as the income earned during the prime years of life can manage the expenses, savings, and investment for future needs. At the age of 60 (sometimes more), the person thinks of leaving his job or business, and he wants to live his remaining life well. He would need to save to maintain his health, safety, security, and lifestyle in the later years of his life. Here are more reasons why a person should start early in investing for retirement fund:
- It will provide for a source of income post-retirement to help meet daily expenses of own and family after the individual is not employed any more
- The retirement fund will help deal with health and wealth-related emergencies
- The best part is that there is no need to be dependent on anyone post-retirement and the individual will be independently taking care of his expenses
- With a sufficient retirement fund accumulated, the individual can live the rest of his life peacefully and the way he always wanted to. There will be no stress of going to work, and he can lead a much more relaxed life
- With the help of a retirement fund, one can acclaim a guaranteed income after retirement in the form of an annuity, which will help meet monthly expenses
Ans. It is as important as a life or a health insurance plan as:
- There is a dire need to understand that with age, the person’s health and physical condition will not allow him to always work. In this case, having a good retirement plan proves to be a virtue, and without having to work like in his younger years, the investor can enjoy a regular source of income
- Although many people have health insurance coverage again that is valid and is conditional as per age standard. If the person is blessed with a good retirement fund, he will be able to cope with medical emergencies. These are conditions that can surely crop up due to aging and can harm the budget immensely
- From childhood or young age, a person may have certain dreams and desires to fulfill, certain passions to cater to, and unfulfilled wishes. Retirement is the time when there is no stress of working or earning income. If he has a good pension amount and a lavish saving, he can check off his bucket list and fulfill his dreams
- The worst thing is to be dependent on other people or children for financial needs. This could burden others, and this may lower his morale and confidence. Having a generous retirement fund is relevant for him to stay financially independent, maintain his mental peace and have a cordial relationship with his family members
- There could be a time when the fund is more than required, and in turn, the retired person can also help the family. He can help them revive or maintain their lifestyle and help them fulfill their financial obligations and in case of emergencies.
Ans. Let us look at the best tips and reasons for retirement planning:
Save for retirement now - Now is the time when the individual has a steady job or a running business, and he can afford to keep aside a part of his income to save for his old age.
Be prepared for future emergencies - There could be physical, emotional, or financial emergencies that would require to be dealt with financially, and at a stage when the individual has retired, it may be difficult for him to meet those expenses. So, savings in a Pension Plan is a great idea.
Explore various Insurance and Pension options - Don’t go by the rule of the book. It is important to explore various options of saving in various kinds of pension plans and Insurance policies to save for the later years of one’s life.
Diversify Investments - It is smart to invest in different plans or opportunities rather than investing the entire money or savings in one fund.
Think about Retirement Wants - Retirement demands and wants can be met using this fund.
Consider inflation - The value of money and currency will surely inflate in the coming years. By the time a person retires, it could reach heights so he must be prepared for it and make arrangements considering inflation.
Ans. With the advantages, there are certain disadvantages as well:
Limited amount of tax deduction allowed - Although it is a vital investment plan, the tax exemption on this fund is pretty low as compared to other saving plans or insurances. The maximum exemption allowed under the Pension Plans is only Rs. 1.5 lakhs under section 80C of the Income Tax Act, 1961. *Tax benefit is subject to changes in tax laws.
Taxation on an annuity - Another disadvantage is that the annuity, returns earned, interests accrued - is taxable and no exemption has been provided on this.
High Risks to be taken if the individual wants to earn high returns - Although there are many traditional low-risk plans in which the individual can invest in, these do not give apt returns. So, to avail a high return on investment, the risk to be taken should be much higher too.
Best suited for early investors, not for the late ones - If a person starts investing for his retirement from the age of 20-21, it will yield higher returns and a much better fund. For a person who is 30-3 years of age, it would be better for him to invest in other plans rather than in retirement pension plans as the returns here would be lower.
Ans. These days there are many riders or additional benefits that can be bought along with the Pension Plans to accrue higher benefits and advantages. The common riders available are:
Waiver of premium rider - Under this, in case of unfortunate death of the policyholder, the reaming premium to be paid towards the pension plans will be waived off, and the burden will not lie on the shoulders of his nominee or family members.
Critical Illness Rider - This is for certain categories of critical illnesses as specified under the terms and conditions of the Pension Plan Policy, wherein the policyholder will be given a lump-sum amount or coverage for hospitalisation and lack of income if this rider is bought along with the pension plan
Accidental Death and Dismemberment rider - In case of unfortunate accidental death or permanent disability of the investor, financial benefits will be given to the family members and the entire onus will be borne by the insurer.
Term rider - This is more like the term plan, wherein the premium is paid towards a certain period of time, and in case of demise of the policyholder midterm, the assured amount will be paid out to his family members.
Ans. The National Pension Scheme is an initiative by the Central Government, which is open to employees from all sectors (except the armed forces). The scheme motivates people to invest in a pension account at regular intervals while they are earning a regular mode of income. After retirement, the investors can take out a certain percentage of the total accumulated amount, and the remaining amount will be received as a monthly pension after his retirement. Earlier, the NPS scheme covered only the Central Government employees, but now PFRDA has opened it for all Indian citizens voluntarily. This is a portable scheme, highly beneficial for investors who belong to the private sector and who are looking for a good retirement fund along with tax benefits under Section 80C and Section 80CCD of the Income Tax Act.*Tax benefit is subject to changes in tax laws.
Ans. Mutual Funds are a private scheme to plan the retirement and offer returns up to 12% to 15% when invested for a long period using the power of compounding. This is quite feasible as a retirement plan which is also a long term plan, and so it can help meet retirement goals. The initial investment can be made in equity funds, and later the investments can be made in debt funds.
Similarly, Bank Fixed Deposits are also traditional saving schemes which attract a much higher rate of interest and ensure high returns at a much lower risk. This can be set aside for retirement of the investor, and a significant sum of money can be accumulated for the investor by the time he retires.
Ans. Suppose the investor is not a Government employee. In that case, he must consider all options based on his age, monthly income and the benefits offered by each pension plan and scrutinise each option thoroughly before settling for the best plan to invest in; One must check the premium as per the budget of the individual and also his eligibility to apply for the same. Comparison of various pension plans is a must before investing funds in one.
Ans. You can take the help of a legal or a financial advisor to gauge the same. Also, one can contact his employer ad retrieve all the documents to assess the valuation of the pension plans as on the current period.
Ans. Retirement is an inevitable process, and work opportunities and sources of income will considerably reduce with time. The stamina and power to earn income, like in the younger days, is impossible. So, at the age of retirement, one should be sufficient with funds, to live his remaining life at ease, without being a financial burden on anyone, not even his children and to fulfil his responsibilities as the head of the family. For that, it is highly recommended to start saving from a very young age to create a retirement corpus which can easily suffice the necessities and maintain the lifestyle of the old age.