Pension Plans

Pension plans also known as retirement plans are investment plans that lets you allocate a part of your savings to accumulate over a period of time and provide you with steady income after retirement. Even if a person has a good amount of savings, a retirement plan is nevertheless crucial. Savings get exhausted very fast and are sometimes used in emergencies, so selecting the best pension scheme helps you secure your cash flow for meeting basic daily needs post retirement. When you continuously invest in retirement plans, the amount grows manifold due to the compounding effect which makes a lot of difference to your final savings corpus. A right pension scheme lets you plan for retirement in a phased manner. So it is advisable to choose a best retirement plan that can act as a savior in your golden years. 

 

Compare and Buy the Best Retirement Plans

Compare and invest in pension plan to enjoy an independent and financially secure retirement. Choose a best retirement plan at PolicyBazaar.

Pension Plans Features

Nowadays, people start planning for the retirement life at an early stage so that at a later stage they do not have to depend on others to make their ends meet. Usually, a conventional retirement plan encompasses following features-

Minimum Guarantee of Pension Plans

Every pension plan needs to have a minimum guarantee. As per IRDA guidelines, there should be "on-zero returns" on all premiums or guaranteed maturity benefits. Most insurance companies guarantee a minimum of one percent of total premium over the complete policy term.

New Pension Scheme Tax Benefits

  • The final payout is provided in two ways. 33% of final pay out can be withdrawn in lump sum and is not taxable. However the rest of the amount is taxable.

Types of Pension Plans

A retirement plan is a crucial investment, considering the prevailing inflation rate. Retirement plans vary in terms of their benefits and structure. Broadly, these plans can be further divided under below heads-

  • Deferred Annuity: A deferred pension scheme allows you to accumulate a corpus through regular premiums or single premium over a policy term. After the policy term is over, pension will begin. The advantages of deferred pension plans are immense and these include tax benefits that are associated with this pension scheme. No tax is levied on the money that an individual invests in the plan unless he withdraws it. As deferred pension scheme can be bought by making one-time payment or by making regular contributions towards it, therefore, the plan suits to all types of investors: those who want to invest systematically and those who have a chunk of money to invest.

  • Immediate Annuity: In an immediate annuity scheme, pension begins immediately. One has to deposit a lump sum amount and pension will start instantly Based on the lump-sum amount, the policyholder will invest at prevailing annuity rates. You can choose your annuity from different annuity payout options. Moreover, you can enjoy tax benefits on the premiums paid as per Indian Income Tax Rules. After the death of a policyholder, his nominee will be entitled to get money.

  • With Cover and Without Cover Pension Plans: The "with cover" pension plans have life cover component in the plan. This implies that on the death of the policyholder, a lump sum amount is paid to the family members. However, the cover amount is not very high since a large part of premium is diverted towards growing the corpus rather than covering for life risk. The "without cover" pension plan implies that there is no life cover. The corpus built till date (after deducting unpaid premium and other expenses) is given out to the nominee in case of the death of a policyholder. Presently, deferred pension plans are "with cover" and immediate annuity plans are "without cover".

  • Annuity Certain: As per this clause, annuity is paid to the annuitant for specific number of years. The annuitant can choose the period and if he dies before exhausting all payments, annuity will be paid to beneficiary.

  • Guaranteed Period Annuity: As per this annuity option, annuity is given to the life assured for certain periods like 5,10,15 or 20 years, whether or not he survives that duration.

  • Life Annuity: As per this annuity option, pension amount will be paid to the annuitant until death. If annuitant chooses "with spouse" option, after the death of annuitant, pension will be paid to the spouse.

  • National Pension Scheme (NPS): New Pension scheme has been introduced by the government for people looking to build up pension amount. You can put savings in new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of amount at retirement and rest 40% must be used to purchase annuity. The maturity amount is not tax free.

  • Pension Funds: Owing to the low front load charges, pension funds are a good way to accumulate corpus amount. Pension funds are meant for long term and hence, they perform better. Pension Fund Regulatory and Development Authority (PFRDA), the government body has allowed 6 companies as fund managers.

Compare Pension Plans at PolicyBazaar

As stated above, retirement plans ensure that your financial independency remains intact even when your source of income ceases to exist. So, it is prudent to compare available pension plans & details in the market to make unbiased decision and choose a best plan. We at PolicyBazaar, understand your woes and advise you to make a systematic comparison of all pension plan details before zeroing in on one retirement plan.

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Choose an apt retirement plan and take one step towards a secured and prosperous future.

 

 

Plan Name Plan Features Entry Age - Min/Max Maturity Age - Min/Max Policy Term(PT) & Policy Paying term(PPT) Plan Benefits Sum Assured in case of Death
HDFC Life Click to Retire
  • Secure your retirement with Assured Vesting Benefit and also gain from upside in the market
  • Lower vesting/maturity age of 45 years
  • No Entry or Exit charges.
  • Partial Withdrawls allowed post the 5th policy year.
  • Tax deduction is available under sec 80(C) when Sum Assured is atleast than 10 times Annual premium.
18 - 65 Years 45 - 75 Years PT: 10, 15 - 35 Years
PPT: Single Pay, 8, 10, 15 Years
  • Policy vests at the end of the policy term, and your Maturity Benefit it will be the higher of: Fund Value or Assured Vesting Benefit.
  • Death Benefit: Incase of demise of life assured before end of policy term, Nominee receives higher of fund value or Sum Assured
105% of the cumulative premiums paid.
Birla Sun Life Wealth Secure
  • Pay premiums for a limited term and get life cover for whole life
  • Flexibility to choose from 3 investment options to suit your investment needs
  • Flexibility of partial withdrawals to meet any emergency fund requirements
  • Tax deduction is available under sec 80(C) when Sum Assured is atleast than 10 times Annual premium.
1 - 60 Years NA PT: whole life
PPT: 5 to 30 Years
*On maturity you get entire Fund Value that is the Total value of your investments. *Guarenteed additions in the form of additional units will be added every year post the 10th policy anniversary. *Death Benefit: In the unfortunate event the life insured dies while the policy is in effect, the nominee will get higher of Base Fund Valu or Base Sum Assured.
For Age less than 45:
Higher of
10 *Annual Premium or [(70 - entry age)/2]* Annual Premium

for age equal to or greater than 45:
Higher of
7 *Annual Premium or [(70 - entry age)/4]* Annual Premium
Max Life FYPP
  • Guaranteed Maturity Benefit
  • Option to choose the maturity age as per your requirement
  • Option to guarantee the retirement benefit for your spouse in the unfortunate event of your death, if you have opted for Max Life Partner Care Rider
  • Guaranteed Loyalty Additions added to the fund, starting 11th year
  • Tax deduction is available under sec 80(C) when Sum Assured is atleast than 10 times Annual premium.
30 - 65 Years 50 - 75 Years PT: 10 - 75 minus entry age
PPT: Single Pay, Regular Pay from 1 Year to Policy Term
Maturity Benefit:
  • Pension Maximiser Option: you will receive an amount equal to the higher of Fund Value or 101% of cumulative premiums (including top up premiums, if any)at maturity. If you opt for the Pension
  • Preserver Option: you will receive an amount equal to the higher of Fund Value or 110% of cumulative premiums (including top up premiums, if any)at maturity.
  • Death Benefit: Higher of the Fund Value as on date of death or Sum Assured
105% of the cumulative premiums paid (including top up premiums, if any)
HDFC Life Click to Invest
  • Premium payment option of single pay, 5 pay, 7 pay, 10 pay or regular pay
  • Choose from the range of 8 fund options
  • Lump Sum partial withdrawls allowed post the 5th year.
  • Tax deduction is available under sec 80(C) when Sum Assured is atleast than 10 times Annual premium.
0 - 65 Years 18 - 75 Years PT: 5 - 20 Years
PPT:
Single Pay,
Limited: 5,7 and 10 years
Regular: 5 to 20 Years
Maturity Benefit: You will get the fund value of your investments & will have the option to take the fund value as periodic installments also.
Death Benefit: Nominee will receive highest of Sum Assure or Fund Value or 105% of all premiums.
Single Premium: 125% of single Premium
Regular and Limited premium (age < 55): 10 * Annual Premium
Regular and Limited premium (age > 55): 7 * Annual Premium
Sbi Life e-Wealth
  • Twin Benefit of life insurance cover and market linked returns
  • Choice of two plan options based on overall exposure to equity, debt and money market instruments
  • Liquidity through partial withdrawals from 6th policy year onwards
  • Tax deduction is available under sec 80(C) when Sum Assured is atleast than 10 times Annual premium.
18 - 50 Years 60 Years PT: 10 - 20 Years
PPT: Same as policy Term
Maturity Benefit: On maturity the current Fund Value of investments made is paid as Lumpsum alternatively option to choose periodic installment options is also there.
Death Benefit:Nominee will receive highest of Sum Assure or Fund Value or 105% of all premiums.
10 * Annual premium

What is accumulation phase?

Ans:

It is the time period during which you regularly pay premiums to the insurance company to receive income post retirement in the form of pension.

Which annuity retirement plan should I choose- Deferred annuity or immediate annuity?

Ans:

Choosing the right annuity plan can bring major changes to your retirement income. Nowadays, many people consider buying annuity pension plans as the part of their retirement option. Annuity plans can be broadly categorized into immediate annuity plan and deferred annuity plan. To know which retirement plan you should choose it is important to learn more about these plans: 

Deferred annuity plan= Under this plan, annuity phase is preceded by saving phase. Such types of policies are designed for people who don't require immediate pensions and have several years till the retirement age. It means they have enough time to invest and build a corpus. All premiums which are paid get invested till the maturity date.

Immediate annuity plan= In immediate annuity plan, if you are above 30 years, you can pay a lump sum amount and then start earning annuity benefits immediately after retirement. The payments can either be scheduled for a fixed tenure like 5, 10 or 15 years. Here, it is important to mention that immediate annuity plans are non-participating products and thus, they don't earn bonuses.

You can choose any of the above plans based on your risk appetite, fund requirement and current annual income.

What are the tax benefits?

Ans:

As per section 80CCC of the Income Tax act, the premiums paid out for the pension plan are subjected to a deduction of up to a maximum of Rs 10,000 on taxable income.

How is a Pension Plan different from a Term Plan?

Ans:

  Term Plan Pension Plan
Objective To get a financial back up for your family in case of your demise To get a financial back up for yourself and your family while still living. Though, like a term plan, it also provides a sum assured to your family in case of your demise
Maturity Benefit Entire maturity amount is paid out at once and is tax exempted 1/3rd maturity amount is paid out as lump sum and is tax exempted The rest 2/3rd is paid out as annuity and is taxable

What are the types of Pension Plans?

Ans:

Pension Plans can be classified on various parameters. Here

 

On the basis of mode of premium payment

Deferred Annuity Pension Plan – The premium is paid regularly on a monthly/quarterly/annual basis. The annuity begins after a time period as specified by the policyholder in the annuity contract.

Immediate Annuity Pension Plan – A lump sum is paid as a one-time premium and the annuity begins almost immediately and continues for the policy term or throughout the insured’s life.

 

On the basis of nature of investment

ULIP Pension Plans – The pool of funds created by the premiums of the insured persons is invested both in debt instruments and equity instruments. Since it’s a market linked plan, the potential for returns is high.

Traditional Pension Plans - The pool of funds created by the premiums of the insured persons is invested only in debt instruments. The returns are steady but not substantial.

 

On the basis of tenure

Life annuity Pension Plan – The annuity is paid out to the insured until his/her death.

Fixed Term Annuity Pension Plan - The annuity is paid out to the insured until a fixed term (decided by the policyholder). The term could be quite earlier than the insured’s death.

How do I calculate the retirement corpus?

Ans:

You can do that with a Retirement Calculator. You need to put in the following details in the calculator and it’ll sum up an ideal corpus.

  • Present cost of living (monthly expenses)
  • Inflation rate
  • Retirement age
  • Number of years you expect to live post retirement

I already have a provident fund account. Do I still need a pension plan?

Ans:

Yes, you do. 'PF is simply not enough.' The ever growing inflation will make your PF amount look quite minuscule in the future. It will not suffice your future expenses. This becomes all the more important, as you become more vulnerable to health problems in your old age. A lone provident fund amount will utterly fail to financially support the healthcare needs.

Why do I need pension plans?

Ans:

Pension plan assures a regular income post retirement when you enter the no-more-paychecks phase of your life. Retirement is perhaps the best time to enjoy leisure activities. Pension plan funds your to-do-lists post retirement. A pension plan is a great way to be financially independent in your second innings.

What is annuity?

Ans:

The regular payouts you get of your pension plan post retirement is called annuity. The annuity can be availed on a monthly/quarterly/half-yearly/yearly basis.

What is a Pension Plan?

Ans:

Pension Plan is a kind of insurance cum investment plan. In this plan, the insured pays regular premium to the insurance company to build up a corpus over time. On maturity (retirement), this corpus is paid back to the insurer in the form of regular income. However, in case the insured dies, the beneficiary will get the sum assured along with the bonuses.

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