Retirement Plans in India

Planning for a financially secure retirement is important for everyone, including NRIs (Non-Resident Indians). As an NRI, investing in a retirement plan can be a smart decision to make sure a stress-free retirement. Pension plans provide a regular income flow after retirement, helping NRIs to maintain their lifestyle and meet their financial needs.

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What is a Retirement Plan?

Retirement Plan is a type of investment plan that enable individuals to save a portion of their income over an extended period to ensure a secure financial future. This plan is designed to assist people in managing their expenses after they retire, providing a stable income stream.

Simply put, A pension plan is a financial tool that allows you to accrue a retirement corpus in the long tenure during your working years. At the time of maturity, you can withdraw a part of the accumulated amount and then invest rest of the funds to buy an annuity plan. The amount of a pension plan increases with regular investments over time, which results in larger retirement savings for individuals. After the retirement of investors retire, they receive periodic payments from the accumulated amount to cover lifestyle expenses and other financial needs.

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Best Retirement Plans in India 2023 For NRIs in USA

Listed below are some of the best pension plans in India:

Retirement Plans in India Entry Age Maturity Age Policy Term Tax Benefit Minimum amount to Invest (yearly)
Tata AIA Fortune Maxima 18-60 years  100 years  100 minus issue age  Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 18,000 
Bajaj Allianz Life LongLife Goal 18- 65 years 99 years of age 99 years- Entry age Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 25,000 
HDFC Life Click 2 Wealth 18-60 years  18-75 years of age 20-64 years Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 12,000 
Max Life Online Savings Plan  18-60 years  18-45 years  5 to 67 years  Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 12,000 
Edelweiss Life Tokio Wealth Secure Plus  18-60 years  18 to 70 years 5-25 years  Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 24,000 
ICICI Prudential Signature  18-75 years  99 years  10-30 years Offers  Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961 Rs. 24,000 
Tata AIA Life Guaranteed Monthly Income Plan 6-60 years of age 68 years of age 5, 8, 12 years Offers tax benefit U/S 80C & 10(10D) of IT Act Rs. 36,000 
Bajaj Allianz Pension Guaranteed Pension Plan 0-100 years of age N/A Lifetime Offers tax benefit U/S 80C & 10(10D) of IT Act Rs. 25,000 
Max Life Forever Young Pension Plan 30 years-65 years 50-75 years of age 10 years to 75 years-Entry age Offers tax benefit U/S 80C of IT Act Rs. 25,000 
ICICI Pru Easy Retirement Plan 18-70 years of age 30-80 years of age 10, 15, 20, 25, 30 years Offers tax benefit U/S 80C & 10(10D) of IT Act Rs. 48,000 
LIC Jeevan Akshay 7 Pension Plan 25-100 years of age N/A Lifetime Offers tax Benefit U/S 80C of IT Act Rs. 1 lakh
LIC New Jeevan Shanti Pension Plan 30-79 years of age 31-80 years of age -- Offers tax Benefit U/S 80C of IT Act Rs. 1.5 lakhs
Max Life Guaranteed Lifetime Income Pension Plan 0-85 years of age 26-90 years of age N/A Offers tax benefit U/S 80C IT Act Rs. 25,000 
Aditya Birla Sun Life Empower Pension Plan 25-70 years of age 80 years of age 5-30 years Offers tax benefit U/S 80C of IT Act Rs. 18,000 
IndiaFirst Life Guaranteed Annuity Plan 40-80 years of age N/A Lifetime Offers tax benefit U/S 80C IT Act Rs. 1 lakh
Kotak Premier Pension Plan 30- 60 years of age 45-70 years of age 10-30 years Offers tax benefit U/S 80C of IT Act. Rs. 1 lakh
SBI Life Saral Retirement Saver 18-65 years of age 40-70 years of age 5, 10- 40 years Offers tax benefit U/S 80C of IT Act Rs. 1 lakh
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Note: There is no limit to maximum investment for a Pension Plan.

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Types of Pension Plans in India

A wide range of retirement plans in India are available to cater to the insurance seekers' requirements. Here is a list of some of the common pension plans:

Let's explore these pension funds in detail.

Types of Retirement Plans Description 
Deferred Annuity
  • In this type of retirement plan, policyholder can receive annuity on amount on a later date via regular or single premium payments. During the policy term, they can accumulate a large amount to be received in form of pension. 
  • Tax benefits are also available 
Immediate Annuity
  • Deposit Lump-sum payment and get the annuities. 
  • Flexibility to choose from range of annuity options and sum to invest. 
  • The nominee is eligible to get the benefits in case of an unforeseen  events. 
Annuity Certain
  • Policyholder gets the annuity for a fixed number of years. 
  • Option to choose the payment period as per their needs. 
  • The nominee receives the payment in case of life assured’s death 
National Pension Scheme (NPS)
  • NPS is a Government pension scheme that helps in long tenure retirement corpus building 
  • Money is invested in equity and debt funds
  • 60% of the corpus can be withdrawn and 40% can be invested in annuity plan on maturity for a regular income. 
With Cover Pension Plans
  • Life cover component included
  • Small cover amount
  • Large premium paid towards growing corpus
Without Cover Pension Plans
  • No life cover
  • Nominee receives corpus in case of death
  • Deferred plans have option for life cover
Guaranteed Period Annuity Annuity provided for certain period, regardless of survival
Life Annuity Pension paid until death, spouse receives pension in case of annuitant's death with 'with spouse' option
Pension Funds
  • Regulated by PFRDA
  • Better returns upon maturity
  • Withdraw annuity sum at aggregation stage
  • No need to rely on banks for loans
Whole Life ULIPs
  • Money invested for whole life
  • Partial withdrawals allowed upon retirement
  • Tax-free income
  • Additional withdrawals allowed
Defined Benefit
  • Specific retirement income guaranteed
  • Formulated based on earnings and years served with employer
Defined Contribution
  • Retirement income not guaranteed
  • Contributions by both employer and employee
HDFC Life Insurance Specialized pension plans for complete protection at affordable costs
SIMPLE IRA
  • Retirement savings plan designed for small businesses with 100 or fewer employees. 
  • Easy and suitable option for employees of small businesses.
SEP-IRA
  • Pension plan that can be opted for by self-employed or employers to meet their retirement needs. 
  • Tax deductions applicable and contributions made to employees as per eligibility.
Roth IRA Special IRA where an individual pays tax on money deposited, but all withdrawals in the future are tax-free.
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Benefits of Retirement Plans for NRIs

Here are some benefits of Retirement Plans for NRIs:

  • Annuity

    An annuity is the fixed amount an investor will receive yearly throughout their life tenure. An annuity can be immediate or deferred depending upon its nature.

  • Sum Assured

    The sum assured is a definite amount offered to the nominee of the plan at the end of the plan tenure. It is generally 10X the policy’s annual premium or fund value.

  • Vesting Age

    The vesting age is when the investors start receiving the monthly pension from their pension plan.

  • Payment Period

    The payment period is when the investor starts receiving the payments post-retirement.

  • Accumulation Period

    The accumulation period is when the investor pays a regular premium toward their policy or plan.

  • Surrender Value

    The surrender value of pension plans is the amount the insurance company will pay the individual if they surrender the plan before its maturity.

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What is Retirement Pension Planning?

With the rapidly changing economic landscape in the world, it has become vital to plan for a secure and comfortable retirement. It is essential to have a well-thought-out retirement plan that considers factors such as inflation, healthcare costs, and changing lifestyle needs.

It is crucial to start planning for retirement as early as possible to accumulate enough funds for future expenses and maintain a standard of living during retirement years.

Advantages of Retirement Plans in India

If you are trying to find the best retirement plan in India, it is crucial to understand different scheme’s benefits available in India.

Let us learn some basic advantages offered by pension schemes in India:

  • Retirement plans assure long-term savings, regardless of the premium payment mode.

  • Pension schemes in India focus on creating an annuity that can generate steady cash flow post-retirement.

  • Retirement plans offer guaranteed income to meet day-to-day expenses.

  • Income plans offer better returns and are a smart way to plan for retirement.

  • Retirement plans provide insurance coverage to financially protect the policyholder's family.

  • The Pension Benefit Guaranty Corporation takes care of pension payouts even if the company liquidates.

  • Pension plans offer tax benefits under Offers tax benefit U/S 80C & 10(10D) of Income Tax Act.

  • Retirement plans in India for NRIs offer different options for individuals based on their needs and preferences.

  • Riders, such as critical illness or disability due to an accident can enhance the coverage of retirement plans.

Note: For detailed information on pension plans, read the plan brochure. You can explore Policybazaar to compare the best retirement plan in India for you.

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Importance of Retirement Plan

A pension scheme is as important as buying a health insurance plan. Here are the reasons why:

  • Working forever is impossible due to aging and deteriorating health over time.

  • Retirement plans provide a regular source of income after you stop working.

  • Medical expenses are common and hefty, so having a pension plan can help.

  • Retirement allows you to pursue things you have had to put off in the past.

  • Being financially independent during retirement prevents you from being a burden on your children.

  • Retirement plans can also help you support your family when they need it.

5 Tips for Retirement Planning

Benefits of Pension PlanBenefits of Pension Plan

India has multiple types of pension plans, so it is important to analyze your financial needs before choosing a retirement plan.

Let's look at the top 5 tips for retirement planning:

  • Save for retirement Now

  • Be Prepared for Future Financial Emergencies

  • Explore various insurance options

  • Diversify your Investments

  • Think about Your Retirement Wants

Eligibility Criteria

The three main eligibility criteria for purchasing retirement plans in India are:

  • Entry Age: Typically, the minimum entry age for a Pension Plan is 18 years, but some plans require an entry age of 30 years. Maximum entry age is usually around 70 years.

  • Premium: Policyholders must pay a minimum premium for their Pension Plan, as the pension amount is based on the premium paid.

  • Vesting Age: The age at which a policyholder begins receiving their pension is known as the vesting age, which is usually set at 40 years but can vary depending on the insurance provider.

Why Should NRIs Buy Retirement Plan? 

Here are some key reasons why having a retirement plan is essential for NRIs living in USA:

  • Financial Security: A retirement plan is crucial for ensuring financial security during your retirement years. It provides a regular income stream, allowing you to maintain your lifestyle and cover essential expenses such as healthcare, housing, and daily living costs.

  • Long-Term Goals: Retirement planning helps you set and achieve long-term financial goals. It encourages you to save and invest wisely over the course of your working years, building a nest that can support you when you are no longer earning a regular income.

  • Peace of Mind: Knowing that you have a well-structured retirement plan in place brings peace of mind. It alleviates concerns about your financial future, reducing stress and allowing you to focus on enjoying your retirement years without constantly worrying about money.

  • Flexibility and Control: By actively participating in retirement planning, you gain greater control over your financial future. You can choose the type of retirement account that suits your needs, decide how much to contribute, and make investment choices based on your risk tolerance and financial goals. This flexibility allows you to tailor your retirement plan to align with your unique circumstances.

FAQ's

  • What should NRIs consider before investing in a pension plan?

    Before investing in a pension plan, NRIs should consider factors such as the reputation and financial stability of the pension provider, the terms and conditions of the plan, any associated fees or charges, the investment options available, the flexibility of contributions and withdrawals, and the tax implications both during the contribution phase and at retirement.
  • What happens to a pension plan if an NRI returns to India permanently?

    If an NRI returns to India permanently, they can continue with their existing pension plan or opt for a different plan suitable for residents of India.
  • How can NRIs choose the right pension plan in India?

    To choose the right pension plan in India, NRIs should consider factors such as their retirement goals, investment preferences, risk tolerance, fees and charges associated with the plan, tax implications, and the credibility and reputation of the pension plan provider.
  • How much money is a good pension?

    Some experts say 10 times the employee’s working life salary is a decent amount of money one can accumulate until retirement. Considering 10x amount for retirement also helps beat inflation.
  • What is the difference between a pension plan and term plan? 

    The main difference between a term plan and a pension plan is:
    • Term Plan: It provides life cover for a specific periods and pays out a death benefit to the nominee in case of the policyholder's demise during the policy term.
    • Pension Plan: It is designed to provide a regular income to the policyholder after retirement, and the payout is in the form of annuity payments, which can be received either for a fixed period or for life.
  • What are the tax benefits of pension plans?

    As per section 80CCC of the Income Tax Act, the premiums paid out for the pension plan are subject to a deduction of up to a maximum of Rs 10,000 on taxable income.
  • How do I calculate my retirement corpus?

    You can use a Pension Calculator to know your maturity amount of pension plans. You need to enter premium amount, put the following details in the calculator:
    • Age at which you want to enter pension plan investment or current age
    • Current monthly expenses
    • Age at which you want to start receiving pension (Between 55 and 75 years)
    Click on calculate to know the final details. You can also adjust for inflation to see the regular investment required to build a corpus. Recalculate with new values if current calculations don’t suit your needs. Further, view plans, compare, and finalize your pension plan with premium payment.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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