At the time of retirement, there is a halt in the steady inflow of income over an extended period of time can be detrimental for a person, especially if they are in their old age and predisposed to being vulnerable to illnesses. Therefore, in order to abate the possibility of such circumstances to occur to a long-serving professional and to incentivize retirement-oriented investment plans; many governments and private organizations offer pensions to their retiring employees.
In the event, an individual does not have these pension benefits, or they are falling short when compared to their costs and liabilities; a person can go for a pension plan. Understanding the importance of insurance, pension plans are structured as investment instruments that can serve as an income replacement to the policyholder, while also giving them the benefits of an insurance policy. Investing in the best pension plan and its provisions can be expected to be paid as per an agreement fixed between the employee and the investment provider and the tenure ends when the employee dies, where the assured sum may be processed to a nominee as stipulated by the deceased in their policy.
A pension plan is necessary, as retirement can be a vulnerable time. The most important factor that one has to consider before retirement is the way their financial situation will be affected after retiring. Since household expenses and liabilities such as loans are non-negotiable; with the help of a retirement plan in India, one has to be conscious of a solution that will allow them to support these expenses well after retiring. A pension plan and retirement funds in India are tailor-made to offer coverage that is adjusted for inflation and prolonged coverage with maturity benefits that are accessible to everyone.
The investment and pension market in India is replete with various types of pension plans.
Types of retirement in India can be divided into three categories:
- Government Retirement Schemes [H3]: Funds that are usually availed at government banks and post offices such as the Public Provident Fund, Senior Citizen’s Savings Scheme, National Pension Fund, which are low-risk and tax-free are government-backed schemes.
- Employee Benefits Retirement Funds [H3]: Many government and private organizations offer pensions to their retiring employees. The pension can be determined by factors such as duration of employment, designation at the time of retirement, or other meritorious contributions. A defined benefit and defined contribution plan can be examples of types of retirement plans offered by employers.
- Personal Investment/Pension Plans [H3]: Insurance-oriented plans such as annuity plans, cover, and no-cover plans can be examples of personal pension plans that are chosen by an investor to support them after retirement.
These are built towards allowing an investor to build their financial corpus as per their needs, dependents, and income. Some types of pension plans are listed below, which the first 4 types of pension plans are the most favored by investors:
- Deferred Annuity
- Immediate Annuity
- Cover and No-Cover Pension Plan
- National Pension Scheme
- Whole Life ULIPs
- Life Annuity
- Annuity Certain
At an age where they are predisposed to illnesses or injury, not having funds allocated to cover them for the remainder of their post-retirement life can be detrimental. Therefore let us understand the features and benefits one can expect from the best pension plan in India:
- Flexible Annuity: Annuity is a feature of pension plans that allows a prospective investor to acquire a sizeable corpus of money through recurrent premium payments over a determined policy tenure. Generally, most policyholders choose between Deferred Annuity and Immediate Annuity. A policyholder can choose from a wide array of options where they can either pay premiums over a period of time, or they can pay a single, one-time premium which allows them to able to earn a premium with the policy commencing.
- Extended Tenure Security: Plans that are considered as the best pension plan in India, often have a feature where their policy tenure is over an extended period of time. The best pension plan in India allows investors to have an insurance option that guarantees high and steady returns because of their long policy tenures. Hence retirement plans in India have an incentive of starting early, as they allow the investor to have financial security at the time of retirement.
- Sum Assured Benefits: Pension plans in India offer a promised amount to the investor which is insured for the duration of the policy. This amount is called the sum assured. There is a variety of sum assured payment options for investors to choose from. Most importantly, a policyholder’s sum assured coverage is based on the premium they pay towards their fund.
Since investing in long-term pension plans is a vital life decision, a policyholder ought to consider the following factors before buying a pension plan:
- Premiums: As aforementioned, one can choose to pay their premiums for their pension plans as per their discretion. They can choose between paying recurrent premiums; which can be monthly or annual. They can also choose to pay a one-time premium which is a lump-sum amount to validate their pension payments.
- Financial Needs: For a young earning individual the goal may be to grow their capital for more investments, but for a middle-aged person it may be driven towards post-retirement financial security. For the people falling into the latter category, who rely on their employment for healthcare and other employee benefits and expenses; it is crucial to opt for retirement pension plans.
- Risk: Different pension plans can cater to different investment needs, from market-related to risk-averse. With the help of respective pension types, a person will be able to meet their expenses in a seamless and stress-free manner, while also being able to avail tax benefits and more.