After hard work of years and years, the phase of retirement comes and everyone imagines that phase as a relaxed time. However, the major factor that plays an important role in making the retirement of an individual as ‘relaxed’ is financial stability. This is because being financial stable one can maintain his/her lifestyle and live a peaceful and independent life and this all can be achieved by planning retirement in the productive years of life itself. This is where the old age pension plan comes into the picture.
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A Old Age pension plan is a type of investment plan wherein a part of one’s savings is allocated for saving for a specific period of time to provide regular income after retirement. In this way, a retirement plan or retirement plan ensures a regular monthly flow of income when one gets retired. For example, the Public Provident Fund is one of the most popular retirement plans.
The early one starts investing in retirement plans, the more money he/she accumulates for his/her golden retirement years. In addition to this, a well-selected retirement plan helps an individual to even rise above inflation. This is because of the corpus (gains and investment) accumulated by the age of retirement can also take care of the cost of healthcare and other lifestyle needs.
Anyone who wants to secure his/her post-retirement period should opt for an old age pension plan. Since there are many plans available in the market so it may become difficult for an individual to select the best-suited plan. Therefore, it is suggested to select a plan after careful understanding of all the types of pension plans provided.
Mentioned below are different types of retirement plans available:
1. Immediate Annuity: In this type of pension plan an individual has to deposit a certain amount in lump-sum and the pension starts instantly according to the amount of investment. The premiums that an insured pays towards vridha pension are eligible for Income Tax exemption. Moreover, in case of death of the policyholder his/, her nominee gets the money according to the selected option. This type of plans also provide various annuity options, which are:
Life Annuity: In this type of annuity, the amount of pension is paid to the annuitant until his/her death. However, if an individual chooses an option wherein the spouse is also included, then the pension is also given to the policyholder’s spouse.
Guaranteed Period Annuity/ Annuity Certain: The annuity is provided for a specific period of time to the policyholder. The annuitant or policyholder has all the rights to select this period and if he/she dies before the policy exhausts, then the annuity is given to the nominee. Most of the plans under this category provide an annuity for a certain period such as 20, 15, 10, or 5 years whether one survives for that time period or not.
2. Deferred Annuity: Under this pension category, the corpus is accumulated through single premium or regular premiums over the entire policy term. The pension begins as soon as the term of the policy completes. This type of pension plans offers massive benefits one of which is tax benefits.
3. National Pension Scheme (NPS): The Nation Pension Scheme in India was launched by the Government of India for common people so that they can easily accumulate some amount for their retirement years. However, with NPS one can now put his/her money in the debt and equity market according to his/her preference. In addition to this, one can withdraw 60% of his/her invested amount at the time of retirement and the remaining 40% is used for the purchase of an annuity. Note: The maturity amount attracts tax.
4. Pension Plans With and Without Cover: With cover pension plan contains a component of life cover and pays the lump-sum amount to the policyholder’s family on his/her death. The cover amount is not high in ‘with cover’ plan as the majority of the part is directed towards the growth of the corpus than providing life risk cover. While in ‘without cover' scheme ‘no life cover’ is provided and in the situation of the unfortunate death of the policyholder, the nominee gets the accumulated corpus.
5. Pension Funds: To invest in pension funds is one of the smartest options because these plans stay in force for a longer period of time and as well offer better maturity returns.
Guaranteed Income Even When One has Retired: A pension plan serves the purpose of lifestyle maintenance even when one gets retired. By selecting an appropriate plan one can live a financially independent life even when one is not earning in his/her golden years. However, before investing in any retirement plan, it is suggested to calculate retirement corpus with the help of a retirement calculator.
Liquidity: It is a product with low liquidity. There are many insurance companies that provide pension funds in India to enable insured to withdraw the pension money even at the accumulation stage. In this way, one is always ready financially to face any unforeseen situations that require money by investing his/her money in this plan. Moreover, this plan prevents an insured from taking a loan from banks under such issues.
Death Benefit: Most of the vridha pension plans provide guaranteed death benefits. The death benefit is the advantage that the nominee of the insured gets in case of the unforeseen demise of the insured during his/her pension tenure. The death benefit is most of the times 105% of the total premiums paid by the policyholder till his/her death.
Tax Benefits: The premiums paid against old age pension plan attract tax benefit under section 80C of the Income Tax Act, 1961. Along with this, there are some other sections as well of the Income Tax Act under which the tax benefits are given, these sections are – 80CCC and 80CCD.
Period of Payment: The payment period is the time frame during which the pension is provided to the policyholder after his/her retirement. Suppose, one gets a pension from 60 years to 75 years, then his/her period of payment is 15 years.
Maturity Age: The age when an insured start getting the monthly income is considered as the maturity or vesting age.
Duration of Accumulation: The time duration in which the corpus is accumulated. For example, if one starts paying for a pension plan from 30 years of age and pays till 60 years, then accumulation duration is 30 years.
Name of the Pension Plan | Age to Enter (Years) | Maturity Age (Years) | Term of Policy (Years) |
Aegon Life Guaranteed Income Advantage Insurance Plan | 20 to 55 | 85 | 85 to entry age |
Bajaj Allianz Retire Rich | 30 to 73 | N/A | 7 to 30 |
BSLI Empower Pension – SP Plan | 25 to 70 | 80 | N/A |
HDFC Life Assured Pension Plan – ULIP Pension Plans | 18 to 65 | 45 to 75 | 10 to 35 |
HDFC Life Guaranteed Pension Plan | 35 to 65 | 55 to 75 | 10 to 20 |
HDFC Life Pension Super Plus | 35 to 65 | 55 to 75 | 10 to 20 |
HDFC Life Personal Pension Plus | 18 to 65 | 55 to 75 | 10 to 45 |
LIC Jeevan Akshay VI | 30 to 85 | N/A | N/A |
LIC Jeevan Nidhi | 20 to 60 | 55 to 65 | 5 to 35 |
Reliance Immediate Annuity Plan | 20 to 80 | N/A | N/A |
Reliance Smart Pension Plan | 8 to 65 | 45 to 75 | 10 to 30 |
SBI Life – Saral Pension | 18 years for Regular Pay and60 years for Single Pay | 40 to 70 | Regular Pay – 10 yearsSingle Pay – 5 years40 |
Disclaimer: †† Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is done in alphabetical order (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Mentioned below is the list of documents required to purchase pension policy in India:
Age proof: Any of the below-mentioned documents can be presented as an age proof:
Birth certificate
Driving License
Voter ID
Passport
Marks sheet of high school
Address Proof: Any of the below-mentioned documents can be presented as residential proof:
Telephone bill
Electricity bill
Passport
Ration card
Aadhar card
Driving License
Identity Proof: Any of the below-mentioned documents can be shown as identity proof:
Passport
Voter ID
Driving License
Aadhar Card
PAN Card
Income Proof: Any of the below-mentioned documents can be presented as income proof:
Income Tax Return file
Bank statement
Salary Slip
Medical Reports: Some insurance providers may require a report of health check-up before accepting any proposal of a pension plan.
Submission of Proposal Form: A policy prospect should submit a duly filled and signed proposal form.
Mentioned below are the tips to select the most suitable virdha pension plan:
A person who wants to take an old age pension plan must make a broad estimate of his/her future financial requirements.
An individual is suggested to closely observe his/her current income and expenditure.
The person should also know the minimum and maximum amount that he/she can invest in a retirement plan.
Perform deep research of all the available plans, read all the available benefits, the maturity benefits, and then select a plan.
Never select a pension plan just because of its tax-friendliness and cheap cost.
You may also like to read: Present Value of Annuity | Future Value of Annuity
Today majority of the insurance plans come with options to improve the coverage, these options are known as riders or add-ons and so does the old age pension plans. Most of the pension plans come with the following riders:
Premium waiver rider
Rider for critical illness
Rider to increase or decrease the term of the policy
Rider for accidental death or dismemberment
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~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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