Pension Plans (Retirement Plans)

Pension or Retirement plans are specially designed investment plans to cater to your post-retirement financial needs and requirements. Through these plans, you can systematically save money to generate wealth to meet your daily living expenses and take care of any unexpected medical emergencies post-retirement. These plans help safeguard your financial future and maintain financial independence without compromising your lifestyle.

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What is Pension Plan?

A pension or retirement plan is a type of investment plan that helps you accumulate a part of your savings over a long-term period to have a secured financial future. It helps you to deal with uncertainties post-retirement and ensures a steady flow of income after retirement. Even if a person has a good amount of savings, a pension plan is nevertheless crucial.

Pension plans in India help you to create a financial cushion in the long term so that you can ensure to have a financially sound future after retirement. In a retirement plan, the insured must contribute a specific amount regularly until the time of retirement. The accumulated amount is given back to the insured as a pension or annuity at regular intervals of time. Best pension plans in India not only secure the individual's financial future after retirement but also help an individual deal with the eventualities post-retirement.

Savings get exhausted very fast and are sometimes used in emergencies. Thus, it is very important to choose the best pension scheme so that you secure your cash flow for meeting basic daily needs post-retirement. When you continuously invest in a pension plan, the amount multiplies due to the benefit of the power of compounding, which makes a lot of difference to your final savings corpus.

Best Pension Plans in India 2023

Here are some of the best retirement plans in India 2023 available in the market.

Pension Plans Entry Age Vesting Age Policy Term Annual Premium Amount Sum Assured
Aditya Birla Sunlife Empower Pension Plan 25 years-70 years 80 years 5 years- 30 years Rs.18,000 N/A
Aegon Life Guaranteed Income Advantage Plan 20 years-55 years 85 years 85 years minus entry age Depends on the coverage, age, term and premium payment tenure Min- Rs.1 lakh
Max- No upper limit
Aviva Next Innings Pension Plan 42 years-60 years N/A 13,16 0r 18 years Limited pay- Rs.50,000
Single pay- Rs.1.5 lakh
N/A
Bajaj Life-Long Goal Pension Scheme 0 years (Life Assured)18 years (Policyholder) - 65 years (Life Assured) and No Limit (Policyholder) 99 years 99 - Entry age of the Life Assured Rs.60, 000/ minimum N/A
Canara HSBC Invest 4G Whole Life 18 years - 55 years N/A N/A N/A Age<45 years - 10X Annualize Premium0.5*Term*Annualize PremiumAge >=45 years - 10X Annualize Premium0.25*Term*Annualize Premium
Pramerica Life Golden Age Plus 18 years-40, 45 & 50 years N/A 15, 20 & 25 years Rs.10,800 Min-Rs.1.5 lakh
Max- Rs.5 crore
Edelweiss Tokio Life -Wealth Ultima With Little Champ Benefits -Life Insured - 0- the 17-year policyholder - 18 - 55 years without Little Champ Benefits -Life Insured - 0 - 60 years 18 - 100 years Minimum: 10 years Maximum:  For 5 - 6 PPT: 70 years For 7PPT and above: 100 years minus age of the policyholder at entry Rs.48,000/- minimum Different Sum Assured according to Age
Exide Life Golden years Retirement Plan 18 years-65 years 55 years-75 years 10 years-42 years Rs.24,000 N/A
Future Generali - Big Dreams Pension Scheme 18 years - 75 years N/A 5 years - 20 years Rs.60, 000 minimum Regular Pay - 10X Annualize PremiumLimited Pay - 10X Annualize PremiumSingle Pay - 1.25X Single Premium  
HDFC Life Click 2 Retire 18 years - 65 years 75 years 10 or 15 - 35 years Rs.24, 000/- minimum -
HDFC Life Pension Super Plus 35 years - 65 years 55 years - 75 years 10 years - 20 years N/A Subject to underwriting
HDFC Life Personal Pension Plus 18 years -65 years 55 years (minimum,75 years (maximum) 10 years( minimum),40 years(maximum) Equal to the policy term Rs. 2,04,841 (minimum); Depends on term, age and premium (maximum)
ICICI Pru Easy Retire Pension Scheme 35 years - 70 years 45 years - 80 years 10 years - 30 years Rs.48, 000/- minimum N/A
ICICI Pur Easy Retirement Plan 35 years-75 years 45 years-80 years 10 years-30 years Rs.48,000 N/A
India First Annuity Plan  40 years- 80 years N/A N/A Rs.50,000 N/A
Kotak Premier Pension Plan 30 years- 55 years/ 60 years 45 years-70 years 10,15,17-30 years Depends on the coverage, age, term and premium payment tenure Min- Rs.2 lakh
Max- No limit
LIC New Jeevan Akshay Pension Scheme 30 years - 85 years N/A N/A Depends on then try age and purchase price N/A
Max Life Forever Young Pension Plan 30 years-65 years 50 years-75 years 10 years-75 years Regular pay-Rs.25,000
Single pay- Rs.1 lakh
N/A
Max Life Online Savings Plan - 50 years - 75 years N/A N/A N/A N/A
PNB Metlife Monthly Imcome Plan-10 pay 18 years-55 years N/A 10 years Rs.23,280 11 times the annual premium paid
Reliance Immediate Annuity Plan 20 years-80 years N/A N/A N/A N/A
SBI Life Saral Pension Plan 18 years-60 years or 65 years 40 years- 70 years Regular pay- 10 years- 40 years
Single Pay- 5 years- 40 years    
Rs.7,500 Min- Rs.1 lakh
Max- no limit
Shriram Immediate Annuity Plan 40 years- 75 years N/A N/A N/A N/A
Start Union Da-ichi’s Life Assured Income Plan 8 years-55 years N/A 20  years-35 years Rs.24,000 N/A
TATA AIA Life Easy Retire 21 years-80 years N/A N/A N/A N/A
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Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer. The tax benefit is subject to changes in tax laws. *Standard T&C Apply

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Types of Pension Plans in India

A wide range of pension plans in India are available to cater to the insurance seekers' requirements. These plans have multiple classifications based on the plan structure and benefits. These pension plans can be further divided into eight categories:

Deferred Annuity
Immediate Annuity
Annuity Certain
Defined Contribution
With & Without Cover Pension Plan
Guaranteed Period Annuity
National Pension Scheme (NPS)
Defined Benefit
Life Annuity
Pension Funds
Whole Life ULIP's

Let's explore these pension funds in detail:

  1. Deferred Annuity

    A Deferred Pension Scheme allows you to accumulate a corpus through regular premium or single premium payments over a policy term. After the completion of the policy tenure, the pension is provided to the insured. The deferred pension scheme offers various benefits, including tax exemption.

    In a deferred pension plan, only 1/3rd of the corpus is tax-free on withdrawal, whereas 2/3rd of the corpus is taxable. The amount invested in a deferred pension plan is locked and cannot be withdrawn for any emergency.

    A deferred pension scheme can be bought by paying one-time payments as well as paying regular premiums. Therefore, these pension schemes are suitable for all types of investors, be it those who want to invest systematically or those who have a chunk of money to invest in one go.

  2. Immediate Annuity

    Under an immediate annuity scheme, the pension is provided immediately. The policyholder has to pay a lump-sum amount, and a pension will be provided instantly, based on the lump-sum amount paid by the policyholder.

    Under the immediate annuity pension scheme, the insured can choose from a range of annuity options. Moreover, the premiums paid are tax-exempted as per Income Tax Act, 1961. In an immediate annuity retirement plan, the policy nominee is entitled to receive the money in case of the insured person's demise during the policy's tenure.

  3. Annuity Certain

    Under this pension plan option, the annuity is paid to the annuitant for a specific number of years. The annuitant can choose the period, and if they pass away before receiving all complete payments, the annuity will be paid to the policy's beneficiary.

  4. With Cover and Without Cover Pension Plans

    With cover pension plans have a life cover component the plan. Upon the policyholder's death, the policy's beneficiary pays a lump sum amount. However, the cover amount is not very high since a large part of the premium is paid towards growing the corpus rather than covering life risk.

    Under the cover pension plan, no life cover is offered to the insured person. In the event of the unfortunate death of the insured person, the nominee will get the corpus (till the date of the death). Currently, deferred pension schemes come with the option of life cover, whereas immediate annuity plans do not offer the option of life cover.

  5. Guaranteed Period Annuity

    Under a guaranteed period annuity plan, the annuity is provided to the policyholder for certain periods like 5 years, 10 years, 15 years, or 20 years, whether or not the insured survives that duration.

  6. Life Annuity

    Under the life annuity plan, the pension amount will be paid to the annuitant until death. After choosing the option of 'with the spouse,' the pension amount will be given to the policyholder's spouse in case of the policyholder's death.

  7. National Pension Scheme (NPS)

    The Government of India introduced New Pension Scheme to secure the financial future of the individual after retirement. As per an individual's preference, the money invested in the National Pension Scheme is put in equity and debt funds to generate returns on investment. The policyholder can withdraw 60% of the amount at retirement, and the rest 40% of the amount is used to purchase the annuity. The maturity proceeds are not tax-free.

  8. Pension Funds

    The pension fund is a type of pension scheme that remains in force for a long period. This pension plan offers a comparatively better return upon maturity and is regulated by the Government under the Pension Fund Regulatory and Development Authority (PFRDA).

    Besides, pension funds provide better returns during the maturity period when one compares to the other and remains active for a specified period. Insurance providers offer pension funds intended to empower policyholders to pull back their annuity sum at the hour of the aggregation stage. This component guarantees that the sum is constantly arranged for an unexpected crisis if it emerges. Above all, it keeps you from relying on banks for a loan under such circumstances.

  9. Whole Life ULIPs

    Under this option of the pension plan, the money stays invested for the whole life of the insured, and upon retirement, they can make partial withdrawals and get tax-free income. Additional withdrawals are allowed whenever needed or whenever necessary.

  10. Defined Benefit

    Defined benefit plans ensure that you pay a specific amount from the retirement income for life. It is decided on the premise of the pension amount, which is formulated keeping into account your earnings as well as the number of years you have served with the employer. This implies that you and your employer can contribute easily to most plans.

  11. Defined Contribution

    In a defined contribution plan, the retirement income is not guaranteed; however, the contributions are. Within this plan, both you and your employer can easily contribute to the plan. Some of the contributions that you make may be matched by your employer.

    You are answerable for contributing all commitments to develop your investment funds. The sum accessible for your retirement relies upon the all-out contributions made to your record and the investment returns this cash earned.

  12. HDFC Life Insurance

    HDFC Life Insurance offers specialized pension plans in India for you and your loved ones. With customized coverages and benefits, it is best suited for individuals who need complete protection at affordable costs.

  13. SIMPLE IRA

    Savings Incentive Match Plan for Employees (SIMPLE) Individual Retirement Account (IRA), or SIMPLE IRA, is a retirement savings plan especially designed for small businesses with 100 or less employees. It is an easy and suitable option for employees of small businesses.

  14. SEP-IRA

    Simplified Employee Pension (SEP) Individual Retirement Account (IRA), or SEP-IRA, is a pension plan that can be opted for either by self-employed or employers to meet their retirement needs. Tax deductions are applicable under the SEP-IRA, and contributions are made to employees as per their eligibility.

  15. Roth IRA

    A special Individual Retirement Account (IRA), Roth IRA, is a pension plan in which an individual pays tax on the money deposited in their bank account every time, but all withdrawals will be tax-free in the future.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Comparison between Pension Plans

For a better understanding, here we have shown a tabular comparison of different pension schemes in India.

Features New Age Retirement Products (Whole Life ULIP) Regular Retirement Product National Pension Scheme Public Provident Fund
100% tax-free income on Retirement for Life Yes No No No
Flexibility to withdraw 100% Fund Value Yes, withdraw up to 100% of Fund Value anytime after 5 years No, withdraw up to 33% of Fund Value upon Retirement No, partially withdraw up to 25% of Fund Value after 10 years No, partially withdraw up to 50% of Fund Value
Tax-free Fund Value withdraw Yes, withdraw 100% of Fund Value tax-free No, withdraw up to 33% of Fund Value tax-free upon retirement No, withdraw up to 60% of Fund Value tax-free upon retirement Yes, withdraw 100% of Fund Value tax-free
Flexibility to increase, decrease income Yes No No No
Choice of multiple investment strategies to maximize the growth of fund value Yes No Yes No
Tax exemption on Amount Invested Sec 80 up to 1.5 Lacs Sec 80 up to 1.5 Lacs Sec 80 CCD (1B) up to 50K & Sec 80 up to 1.5 Lacs Sec 80C up to 1.5 Lacs

Features and Benefits of Retirement Pension Plans

In today's day and age, people start planning for retirement living at an early stage so that at the later stage, they do not have to depend on others to make ends meet.

In case you want to opt for a Pension Plan, ensure that the plan you choose has the following features:

  1. Annuity

    An annuity is the fixed amount an investor will receive each year throughout their life tenure. An annuity can be immediate or deferred depending upon the nature. As the name suggests, an immediate annuity starts immediately. The insurance company pays the pension plan annuity amount right after receiving the lump sum premium. An immediate annuity pension fund comes with the option of a single premium payment so that the insurance company can use the amount invested by the policyholder to build up a corpus.

    The deferred annuity pension plan starts paying a certain sum after a few years. The insurance companies offer a diverse range of plan options for different terms that allow the policyholder to choose the period for which they want to receive the annuity.

  2. Sum Assured

    The sum assured is a pre-defined amount offered to the insured during the policy's tenure. The sum assured amount is generally offered as a death or maturity benefit under with cover pension plan. The insurance companies determine the sum assured amount in different ways.

    Under some pension schemes, the sum assured amount is determined as 10 times the annual premium paid, while others may offer a sum assured that equals the fund value of the policy opted by the individual. In case there is no sum assured, then the plan is more like a pure pension plan rather than an insurance plan with a pension scheme.

  3. Vesting Age

    The vesting age is the age when the investors begin to receive the monthly pension. For example, most pension plans keep their minimum vesting age at 45 or 50 years. The vesting age in a pension scheme is flexible up to the age of 70 years. However, some insurance companies allow the vesting age to be up to 90 years. 

  4. Accumulation Period

    The investors can either pay the premium in one go as a lump-sum investment or at periodic intervals. The premium invested is accumulated over a long-term period to create a financial cushion for the future. If you start investing at the age of 30 and continue to invest until you turn 60, then the accumulation period of the pension plan will be 30 years. Your pension for the chosen period majorly comes from this corpus.

  5. Payment Period

    As the name suggests, the payment period is when the investor starts receiving the payments post-retirement. For instance, if an individual receives a pension from the age of 60 to 75 years, then the payment period of the pension plan will be 15 years. In most pension plans, the accumulation phase is kept separate from the payment period. However, some pension schemes also offer partial or complete withdrawal during accumulation.

  6. 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 if they have paid the premium for the minimum period. When an insured surrenders their pension plan, they lose all benefits offered by the plan, including the life cover, if any.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Minimum Guarantee of Pension Plans

Every pension plan must have a minimum guarantee. Every premium paid towards the insurance and maturity benefits must have 'on zero returns,' as instructed by the Insurance Regulatory and Development Authority of India. This should not be less than 1% of the premiums paid over the years.

Though the minimum guarantee is applicable on all variable insurance plans, most companies offer various types of Pension Plans that may offer better returns than the guaranteed plans. This varies from plan to plan, and you should make sure that you pick the ones that offer the best return. The minimum guarantee of pension plans provides a guaranteed amount that the policyholder will receive at the end of the policy period.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Factors to Consider While Buying Pension Scheme

Here are different factors that should be considered while purchasing best Pension Plan in India:

Monthly Expenses: While planning for retirement, it is very important to keep in mind the monthly expenses. After retirement, the regular source of income is cut-off. Thus, to keep up with the family's monthly expenses, it is important to create a financial corpus big enough to take care of them. Apart from the monthly expenses, it is important to allocate ample funds for unexpected post-retirement financial emergencies.

Inflation: While purchasing a Pension Plan, it is important to consider the growing inflation rate and plan accordingly how much corpus will be sufficient to maintain a financially secured lifestyle after retirement.

Life Expectancy: There is no way to predict how long an individual will live correctly. Thus, while purchasing the best pension plans, your retirement fund should be sufficient enough to support your financial needs during old age.

Medical Expenses: Young people often tend to ignore their future medical expenses. However, one may have to spend a bomb on medical check-ups and treatments when one gets old. Thus, your pension plan must provide you with an adequate fund to deal with any type of medical emergency.

Assets and Loans: Your outstanding loans and current assets are other important things you should consider while purchasing the best Pension Plans. If you have any outstanding loans, repay these loans (s) on time. If you fail to repay the loan(s) on time, it can take away a chunk of the annuity income.

Understand Your Financial Needs: You must understand how much you need to sustain yourself and your dependents after retirement.

Do Some Research: Read through the pension plan details in depth to understand what you are signing up for. The pension details in the pension scheme will offer information on the periodicity of your income, how much is guaranteed, how much is dependent on market performance etc.

Understand the Different Products: Various retirement plans are available in the market. Shortlist the ones that will fulfill your financial expectations.

Know About Other Retirement Planning Options: Do not stick to a retirement planning solution just because someone says so. One product that suits your friend may not suit you. Look up the provident funds or pension funds offered by the asset management companies and those offered by the insurance companies to get what you need.

Do Not Look at Only the Tax Benefits: Consider tax benefits as a secondary benefit instead of a primary benefit. If you opt for a retirement plan, considering only the tax benefits, you might not be able to build up the corpus you need for your retirement. So, do your retirement planning calculations and choose a plan accordingly.

What is Retirement Planning?

Retirement Planning can be described as the process of planning long-term and short-term financial goals and the ways to accomplish these goals. Retirement Planning involves identifying different income sources, analyzing the financial objectives, estimating future expenses, opting for a savings program, and managing risk and assets.

Planning for retirement is, instead, a life-long process. Even though one can start their retirement at any age, it works best when an individual includes this factor into their financial planning from the beginning. Planning for retirement from an early stage of life is the best way to ensure a secured, safe and fun retirement.

Let's take a look at the key takeaway of retirement planning.

  • Retirement planning can be described as the financial planning of investment, savings, and final distribution of money to sustain oneself at the time of retirement.

  • Various popular investment options allow individuals to accumulate funds with the advantage of tax benefits.

  • While planning for retirement, it is important to consider factors like future liabilities, expenses, life expectancy, and assets and income.

  • The earlier one starts planning for retirement, the better fund one can accumulate over a long period to have a secured life after retirement.

Comparison Between Pension Plans
  • Feature
  • New Age Retirement Product (Whole Life ULIP)
    vs
  • Regular Pension Plans
    vs
  • National Pension Scheme
    vs
  • Public Provident Fund
Tax Benefits
  • Tax Free Income upon Retirement for Life
  • Tax Free Fund Value withdrawal
  • Tax Exemption on Amount Invested
  • SEC 80C UPTO 1.5 LACS
  • SEC 80C UPTO 1.5 LACs
  • SEC 80 CCD(1B) UPTO 50K
  • SEC 80C UPTO 1.5 LACS
Flexibility
  • Flexibilty to fully withdraw Fund Value anytime
  • Flexibilty to increase, decrease pension
  • Choice of multiple investment strategies to maximise returns
Know More

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Retirement Planning Goals

It is important to note that planning for retirement starts way before an individual gets retired—the sooner, the better. Even though the amount of money one requires to retire comfortably is entirely personalized, various rules of thumb can provide an idea of how much to save.

Here we have taken an example to help you understand how much retirement corpus one needs at the time of retirement.

Mr. Kumar is 42 years old married man and is currently working in a private company in the position of senior product manager. His wife is the only member of the family who is dependent on him. Mr. Kumar wants to retire at the age of 60.

He currently earns Rs. 80,000 per month, while his monthly expense is Rs. 52,000, including the insurance premium and mutual fund investments. He is adequately insured and has created an emergency fund of 6 months. Considering the abovementioned information, let's look at how much retirement corpus he needs during retirement.

Current Monthly House Hold Expenses Rs. 32,000
Post Retirement Monthly Current Expenses Rs. 32,000
Number of years left for retirement 18 years
Life Expectancy 87
Estimated Post Retirement Expenses Rs. 69,085
Retirement Corpus Required Rs. 2,11,94,287

To maintain the same lifestyle after retirement, Mr. Kumar will require approximately Rs.2.12 crore to live a secure life after retirement.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Advantages of Retirement Plans in India

If you are trying to find the best pension plan in India, it is very important to understand the advantages of retirement planning and the benefits offered by various pension schemes in India. Each pension scheme in India comes with its specific retirement benefits. Further, here we have mentioned some of the advantages offered by the pension scheme in India.

  1. Savings for a Longer Term

    Irrespective of the premium payment mode selected by you, which can be multiple small payouts or a lump sum payment, one thing you assure with a retirement plan is savings for the long term. Pension scheme India mainly focuses on creating an annuity that can further invest in generating a steady flow of cash for your post-retirement years.

  2. Regular Income after Retirement

    The pension scheme in India offers a guaranteed income that helps the policyholder to meet their day-to-day expenses. Your current income and future inflation should lay the foundation of your retirement planning as it will help you to compute the money you'll need post-retirement. Some insurance plans offer income that ensures the policyholder does not have to worry about the future. Since these life-income plans offer better returns, it is a smart way to walk down the lane of retirement planning.

  3. Insurance Cover

    The retirement planning solutions people invest in provide them with an insurance cover to protect their family if the worst comes to pass financially. Most life insurance companies offer an insurance cover benefit under various retirement plans, so the spouse does not have to face any financial difficulty if the unfortunate happens.

  4. No-Risk in Investment

    The pension schemes in India protect the policyholder against any kind of investment risk. If your employer offers your pension plan, then also you need not worry. This is because, even with the stock market downfall, the company has to make up to recover the lost money.

    However, there will not be any negative effect on your retirement benefit. Moreover, even if your company goes bankrupt, nothing happens to your pension even then. This is because the government entity- the Pension Benefit Guaranty Corporation, takes care of your pension payouts.

  5. Tax Benefits of Pension Plans

    Your investment in retirement planning solutions will help you save significantly on your tax. If you plan it well, enjoy the offered tax benefits. Checking the policy details will also allow you to understand if you can avail of tax benefits under Section 80C of the Income Tax Act.

  6. Money When You Need It

    Some plans offer lump-sum payments that you can use to meet major expenses (if any). In the years leading up to retirement, an individual may need funds for various reasons, such as buying a flat or paying for a children's wedding. Some pension plans offer to withdraw a large chunk of your corpus to meet financial emergencies. Checking the policy details for the various plans will help you in Retirement Planning, as you will be able to pick the ones that suit your future financial expectations.

  7. Different Plans Caters to Different Individuals

    While buying a retirement plan in India, you will get numerous options. These options will be according to the retirement age and the inclusions you may want. You can pay a lump sum of approximately Rs.5 Lakh in one go and immediately start getting annuity payments. Or you may go for a deferred annuity policy to get more interest before the start of the payout.

  8. Option to Enhance the Protection

    By opting for an add-on rider, you can enhance the coverage of your retirement plans in India. Some retirement plan riders worth considering are disability due to an accident rider, critical illness rider, etc.

  9. You can choose ULIP

    With pension schemes in India, you can go for the option of a Unit-Linked Insurance Plan. Under a ULIP, your money will be invested in equity and debt funds or safer government securities as per your preference. You can get a huge corpus based on the market returns at your retirement. It can help you to maintain your lifestyle without making any compromises.

    Note- For detailed information on the pension plan, read the plan brochure. You can log on to PolicyBazaar.com to compare the best retirement plan in India for you.

Why Do You Need to Start the Retirement Planning Today?

The early on you start planning for your retirement, the more wealth you can create over a long period to create a secure future after retirement. Let's take a look at the reason why you should start retirement planning today.

  • With the help of the retirement plan in India, you will be able to take care of the family's financial needs after retirement, as it will provide you with a source of income post-retirement.

  • The money saved for retirement can help you deal with any type of emergency, whether wealth-wise or health-wise, in the future.

  • One of the most important advantages of retirement planning is that you can live a stress-free retirement life after retirement as you will not have to depend on anyone.

  • With proper retirement planning and investing in the right pension plan, you can maintain a good lifestyle after retirement and even fulfill your unfulfilled desires that you couldn't early on in your life.

  • With the help of pension funds in India, you can assure a guaranteed income after retirement as an annuity to take care of your monthly expenses.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Importance of Retirement Plan

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

  1. You won't be able to Work Always

    Some people want to work until the last day of their life. Due to aging, poor health will stop most people from working. In such cases, having a regular source of income works as a virtue. Retirement plans can provide a regular source of income even when you will not be able to work.

  2. To Save for Medical Emergencies

    The older you get, become more prone to develop/ contract health issues. Aging doesn't only affect your health, it affects your pocket as well. After retirement, one of the most recurring expenses is medical expenses. If you don't have a senior citizen plan, you have all the more reasons to opt for a retirement plan.

    A medical emergency may leave a big hole in your pocket, especially post-retirement. Having a pension scheme can help you keep such financial crises at bay.

  3. To Check -off Your Bucket List

    You might have made many compromises from childhood to old age, such as not pursuing your dreams, travel plans, etc. However, you can easily check off your bucket list items if you have planned your retirement gracefully by opting for one of India's best retirement plans.

  4. To Stay Financially Independent

    By being financially independent, you will not become a burden to your children during your post-retirement life. This will give you mental peace and give your family (children) a sense of satisfaction that their parents are financially sound.

  5. You Can Help your Family as Well

    Another benefit of retiring gracefully with retirement plans is being able to help out your family in their bad time or when they need (if need be).

5 Tips for Retirement Planning

Various retirement plans in India ensure a safe and tension-free retirement. They are among the most popular choices for retirement planning. Since there are many different types of pension plans in India, it is important to analyze your financial needs before choosing a retirement plan.

Let's take a look at the top 5 tips for Retirement Planning:

  • Save for retirement Now- Many of us rely on personal savings as a retirement planning option. While the salaried individuals will have pension income after retirement and the self-employed will have savings, opting for a pension plan early on in life always works as a lifesaver.

  • Be Prepared for Future Financial Emergencies- Since most people have only one source of income, having a retirement corpus to fall back on during the golden phase of your life will be pretty comforting. The corpus should be adequate to take care of your future financial emergencies.

  • Explore various insurance options- In case you have any dependents, then life insurance serves as the primary income replacement option for those who depend on you. In case you don't have any dependents, then you can invest your income in different investment instruments where it can multiply, and you can receive a good return on your investment during a particular period.

  • Diversify your Investments- Retirement Planning doesn't have to be boring. Since investing only in retirement plans may not be enough to support your financial situation after retirement, you consider putting your money in different investment instruments for long-term capital appreciation and return. Moreover, various investment plans also provide a tax advantage to individuals

  • Think about Your Retirement Wants- Before you reach your old age and retire, start saving money according to your retirement needs. For example, as you age, the medical expenses automatically increase, so secure yourself and your family with proper health insurance so that you are covered entirely in case of any critical illness. Do give a thought to many other factors like which city you want to settle in after retirement, a major investment that can take place after retirement, etc.

Eligibility for Retirement Plans in India

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

  • Entry Age: You can purchase a Pension Plan only after you attain a certain age. There are different age brackets for different insurance plans, but generally, the minimum entry age for a Pension Plan is 18 years. However, some companies have set the entry age for these plans as 30 years. In the same way, there is a maximum entry age for the pension fund. In most cases, it is around 70 years.

  • Premium: There is a minimum premium payment that the policyholder has to pay for taking a Pension Plan. This is because the pension is received according to the premium paid by the policyholder.

  • Vesting Age: This is the age at which the policyholder starts getting a pension. Generally, it is set at 40 years. It can go up to the limit provided by the insurance provider.

How to Calculate the Return of Pension Scheme?

While it is important to plan your retirement and generate a retirement corpus strategically, an investor should opt for a retirement plan based on the offered returns.

Here is how you can calculate the return of pension plans:

With the help of the online pension calculator, you can easily calculate the return of pension plans. You will need to enter information such as your savings, expenditure, current financial liabilities, the total sum required, and monthly expenses. Based on the information, the pension scheme returns can be calculated.

FAQ's

  • Q: What is Provident Fund?

    Ans: The Provident Fund (PF) scheme was launched by the Government of India in 1968 to create a Pan-India scheme for citizens to plan their retirement. Any Indian above the age of 18 years can open a PF account and deposit amounts from as low as Rs.500 to Rs.1.5 lakh per year.
    The PF interest rate is compounded over its 15 years tenure to build up a large retirement corpus base for the individual. It has a lock-in period of 7 years and allows the investors to make withdrawals from the eighth year onwards, though the withdrawal of all the funds is allowed only after the maturity period. The plan can be renewed beyond the initial 15 years for additional periods of 5 years each.
  • Q: What is the Employees' Provident Fund or Employees' Pension Scheme?

    Ans: Employees' Provident Fund (EPF) is a provident fund and insurance scheme administered by the Government of India for all employees of various organizations across the country. The provident fund requires employees of a member organization to make a contribution of 12% of their income towards the fund, along with an equal contribution by their employers.
    The Employees' Pension Scheme (EPS) is a completely different scheme. Still, it is interrelated with the Employees' Provident Fund, both being managed under the Employees' Provident Funds and Miscellaneous Provisions Act of 1952. The Employees' Provident Fund Organization diverts 8.33% of the 12% salary contribution the employers have made for their employees' EPF into the employees' EPS accounts. The 12% contribution the employees have made from their salary stays in the EPF.
  • Q: What is Participating and Non-Participating Pension Plan?

    Ans: The participating pension plans are also called the traditional type of insurance plans since the bonus in these products are similar to the reversionary bonuses of the standard insurance policies. The insurance company generally declares this bonus each year based on its performance in the previous year. The reversionary bonus is generally of the nature of simple interest, where the bonus of the previous period does not get added to the sum assured. These bonuses declared in the tenure of the retirement policy get accumulated, and the lump sum amount is distributed to the insured party when the policy matures.
    The non-participating plans declare their bonus amounts when the investor signs up for the plan. Most of the top pension plans in India offer retirement benefits or bonuses that are pegged to certain indices. These may be the more extensive market index or smaller indices comprising a few securities or government bonds. The non-participating plans offer more definite returns and make it easier for people to plan their retirement.
  • Q: What is an annuity?

    Ans: The regular payouts you get from your pension plan post-retirement are called an annuity. The annuity can be availed monthly/quarterly/half-yearly/yearly.
  • Q: Why do I need pension plans?

    Ans: A 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. A pension plan funds your to-do lists post-retirement. A pension plan is a great way to be financially independent in your second innings.
  • Q: 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 relatively 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 fail to support the healthcare needs financially.
  • Q: How do I calculate the retirement corpus?

    Ans: You can do that with a Retirement Calculator. You need to put the following details in the calculator, which will summarize an ideal corpus. Present cost of living (monthly expenses) Inflation rate Retirement age Number of years you expect to live post-retirement.
  • Q: How is a Pension Plan different from a Term Plan?

    Ans:
    Term Plan Pension Plan
    Objective To get a financial backup for your family in case of your demise To get a financial backup 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 The entire maturity amount is paid out at once and is tax exempted 1/3rd maturity amount is paid out as a lump sum and is tax exempted. The rest 2/3rd is paid out as annuity and is taxable
  • Q: What are the tax benefits of Pension Plans?

    Ans: 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.
  • Q: Which annuity retirement plan should I choose- Deferred annuity or immediate annuity?

    Ans: Choosing the right annuity plan can change your retirement income significantly. Many people consider buying annuity pension plans as part of their retirement options. Annuity plans can be broadly categorized into immediate and deferred plans.
    Deferred Annuity Plan:
    Under this plan, the annuity phase is preceded by the saving phase. Such types of policies are designed for people who don't require immediate pensions and have several years till 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 an 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; 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.
  • Q: What is the 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 a pension.
  • Q. What does a pension plan do?

    Ans: Pension plan is a beneficial investment product for individuals who are willing to keep aside a pool of money at the earning age to reap the benefits after they retire.
  • Q. How can I get Rs. 50,000 pension per month?

    Ans: One can easily earn Rs. 50,000 per month through the NPS (National Pension Scheme). As per the scheme, a minimum of 40% (which can go up to 100%) of the total corpus needs to be invested in the purchase of an annuity that will provide pension returns after retirement. The remaining 40% (or the rest percentage not invested in the annuity) can be withdrawn tax-free as per the requirement of the individual.
  • Q. How do I start a retirement plan?

    Ans: Simple steps to be followed to start a retirement plan in India are:
    • Start saving
    • Know your retirement goals
    • Have a detailed knowledge of your retirement plan
    • Never use your retirement savings before retirement
    • Plan carefully before investing
  • Q. What pension plan is best?

    Ans: Some of the best pension plans one can opt for are as follows:
    • IRA Plans
    • Solo 401(k) plans
    • Defined Contribution Plans
    • Traditional Plans
    • Guaranteed Income Annuities (GIAs)
  • Q. What is the maximum monthly pension?

    Ans: As per the Government of India, the maximum limit of monthly pension is 50% of the top paid, that is, Rs. 1,25,000 per month currently. Pension is payable till the date of death of the pension holder.
  • Q. How much money is a good pension?

    Ans: As per some experts, 10 times the employees working life salary is a decent amount of money one can accumulate at the age of their retirement.
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Pension Plans Insurance Reviews & Ratings
4.6 / 5 (Based on 130 Reviews)
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