Beginners Guide - Pension Plans in India

The pension plans are an ideal way to protect post-retirement financial stability. The pension plans are essentially maintained by the employer to shield you against any uncertainties that may occur at any point in time post you retire.

  • Peaceful Post-Retirement Life

  • Tax Free Regular Income

  • Wealth Generation to beat Inflation

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

Invest ₹6,000/month & Get Tax Free Monthly Pension of ₹60,000

Get the best returns & make the most of your Golden years

View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp
We are rated
58.9 million
Registered Consumers
26.4 million

In this article, let us get into the nitty-gritty of pension plans in India.

What Does a Pension Plan Mean?

The pension plan is also referred to as the retirement plans. With this, you can invest a portion of your hard-earned income into a designated plan. The prime objective behind any of the pension plans is to have a steady flow of income after retirement.

With the rising inflation, investing in a pension plan is of prime importance. Let us just understand that even if you have savings in your bank account, you might still need the pension funds in the coming times. This may happen because the savings might get exhausted in meeting the everyday unavoidable expenses. Therefore, with the correct plan in place, the pension funds will always support you when any other source of income ceases to exist.

The pension plans ideally have two stages in India that are the stage of accumulation and stage of vesting. The investors need to pay the yearly premiums until they reach the retirement age in the former. Once the age of retirement is reached, then only the stage of vesting commences. At this stage, the retiree will initiate receiving the annuities till their demise or the nominee’s demise.

Is There Any Tax Implications of the Pension Plans?

You should know that the contributions made to the pension plan remain tax exempted with the highest ceiling of Rs 1.5 lakh within Section 80CCC. The contributions also include the sum that is spent upon purchasing a new pension plan or even renewal of the existing plan of a similar nature. The non-residents and the residents can easily claim the tax deductions offered under this section. It is to be noted that a Hindu Undivided Family member is not entitled to make any claims within the section.

Moreover, the withdrawals are not tax-free. Once you reach the retirement age of one-third of the corpus is then distributed by the pension plan, which is tax-free. The remaining sum is then distrusted as an annuity also subject to taxation on the premise of the rare of tax for the retiree during retirement.

Understanding the Advantages of the Pension Plans

Listed below are some of the major advantages offered within a pension plan:

  • Long-term Savings: The pension plans serve as the long-term scheme of savings irrespective of whether you select multiple payments options of the small sum or a lump sum payment, the savings are assured. The pension plan helps to create annuity that can be invested later giving rise to a steady flow of income post the retirement.
  • Life Insurance Cover: There are pension plans available in the market, which offers lump sum amount either when an individual retires or in case of demise, whatever situation occurs earlier. This essentially means the pension plan also serves as the life insurance cover.
  • The Alternative in Investment: The pension funds give an investor the alternative to either go for equity investment on the premise of the risks or with safe government securities. The risk is levelled by the anticipation of greater returns, which is generated by an investment.
  • Choose to Get Paid:  On the premise of the age and the plans, you can easily invest with a lump sum amount and instantly receive the annuity payments. Another option you have is to choose the deferred annuity plan that will let the corpus earn interest until the payouts commence.
  • Avail an Amount During Emergency: You are permitted to make the adjustments the pension plan to avail the lump sum payout in case of any emergency. This is generally done to cover long-term health care.
  • The Effect of Inflation: It is one of an ideal way of negating inflation effect by simply investing in the pension plans. The pension plans will pay a lump sum at the phase of retirement that sums to the higher of one-third of the corpus accumulated and the remaining one-third corpus is then used to generate the cash flow steadily.

The Bottom Line

The ideal time to invest in the pension plan is as early as possible. For instance, if someone is 21 years of age the substantial returns will be more when compared to someone who is 30 or 35 years of age. The pension plans also qualify for a tax deduction, however, the highest allowed deduction upon the life insurance premium is of Rs 1.5 lakh within the Income Tax Act of 1961. In case you receive the annuity after the retirement, then it will be taxable on that date itself.

Just ensure the payout during the retirement is sufficient as you might look for investment options with risks so that you can generate higher returns. The conventional non-risky investment alternative might not be sufficient to override the inflation effects.

Secure Your Retirement Today
Start Investing ₹6,000/month
Get Pension ₹60,000/month+
Including Life Cover
View Plan
Pension Plans
+Standard T&A Applied
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Retirement Plans
Monthly Pension Plans
Higher Returns Than Fixed Deposit
Retirement Calculator
Retirement Calculator
How much do you need to save for retirement?
₹ 20,000
₹ 25,000
₹ 30,000
Monthly Expenses in 2023
Edit Done
Your expense go up every year by
Today 2023 Your expenses today in 2023, at the age of 34 Yrs
Your expenses in 2043, at the age of 55 Yrs
For a monthly pension of ₹77,300
you need to invest
Calculated as per past performance of 15%
View Plan Recalculate?

Pension plans articles

Recent Articles
Popular Articles
How to Get a 50K Pension Per Month?

15 Jun 2022

Retirement planning should form an essential part of your
Read more
NPS Premature Withdrawal

15 Jun 2022

The National Pension Scheme is the Central Government’s social
Read more
Get 30K Pension Per Month

15 Jun 2022

Planning retirement is extremely important and crucial these
Read more
Atal Pension Yojana Premium Chart

08 Jun 2022

Atal Pension Yojana (APY) is a government of India initiative to
Read more
Pension Scheme for Senior Citizens

02 Jun 2022

Retirement planning is paramount to creating a constant source
Read more
National Pension Scheme (NPS) – Govt Approved Pension Scheme
National Pension Scheme or NPS scheme is an investment cum pension plan launched by the Indian Government. This
Read more
NPS Calculator - National Pension Scheme Calculator Online
National Pension Scheme Calculator is an online tool, which allows the individual to calculate the estimated
Read more
How to Unfreeze NPS Account?
Are you facing trouble accessing your NPS account and being unable to deposit your recurring subscription? Do not
Read more
Post Office NPS Calculator 2023
National Pension System is a scheme launched by the Government of India that offers stability to all Indian
Read more
How to Get a 50K Pension Per Month?
Retirement planning should form an essential part of your financial decision-making. As we grow older, job
Read more

Download the Policybazaar app
to manage all your insurance needs.