What are Pension Plans/Retirement Plans?
Retirement Plans are a category of life/annuity plans that are specially designed to meet your post-retirement needs such as medical and living expenses. To ensure that you can enjoy your golden years with financial independence, these policies help you plan for your expenses and secure your future.
Why do I need to plan for my retirement?
With average life expectancy increasing in India, it has become increasingly important to plan for a longer retirement. The life expectancy figures indicate how long an average individual lives. In India, the average life expectancy of a person aged 60 is 18.022 years. This means that an average Indian lives up to the age of 78. Hence, you need to start planning in advance to maintain your lifestyle and take care of other expenses for such a long duration.
A major worry with increasing age is unforeseen medical expenses. Rising medical costs can be difficult to manage unless you plan for them in advance.
You would like to live your life on your own terms after your retirement. However, more than 65%^^ individuals above the age of 60 depend on others for their daily expenses. This shows how important it is to plan for your retirement and ensure your financial independence.
^^As per the 'Situation Analysis of The Elderly in India' report of Ministry of Statistics and Programme Implementation MOSPI
Benefits of Retirement Plans
GUARANTEED REGULAR INCOME FOR LIFE
With Retirement plans, you and your spouse can receive regular pension for life.
SECURITY FOR YOUR CHILDREN IN YOUR ABSENCE
In some retirement plans, your children will receive a lump-sum amount in the absence of both you and your spouse. This helps you leave behind a legacy for your children.
TAX BENEFITS U/S 80CCC AND 10(10A)
Apart from enjoying a comfortable retirement, you can also enjoy tax benefits** on the premium paid up to a limit of ₹1.5 lakh.
**Tax benefits are subject to conditions under Section 80CCC and 10(10A) and other provisions of the Income Tax Act, 1961. Applicable taxes will be charged extra as per prevailing rates. Tax laws are subject to amendments from time to time.
4 ways to pass on your retirement plan money to your family
ENTER CORRECT NOMINEE DETAILS
Provide correct nominee details to ensure your nominee receives the money, in case of your demise during the policy term. Ideally, make your spouse or child the nominee.
INFORM YOUR NOMINEE ABOUT THE POLICY
Ensure your nominee is aware about your plan and share key policy details. (e.g. Policy Number), so that he/she can get the claim amount without hassle.
BUY THE RIGHT ANNUITY PLAN TO SECURE YOUR SPOUSE
For e.g. you can secure your spouse's future by opting for a joint life annuity plan. Regular income will be provided to your spouse after your demise.
BUY AN ANNUITY PLAN THAT CAN HELP YOUR CHILDREN
For e.g. you can buy an annuity with return of purchase price. You will receive regular income as long as you live. After you, your children will get back the initial lump sum paid by you.
No matter what your need is, we have a solution
How much do I need to save for retirement?
It is important to consider your financial requirements after retirement to calculate the retirement kitty that will suit your needs. You must decide the amount required to maintain your lifestyle as well as take care of your increased medical expenses.
Why should I start planning for my retirement now?
at 8% inflation
Invest at 45 yrs age retirement amount will be
₹44,00,000
Invest at 45 yrs age retirement amount will be
₹74,00,000
Inflation at 7%
Power of compunding
Power of Compounding
If you start saving early, your money will get more time to grow. For example, if you start investing ₹ 1.5 lakh p.a. at the age of 45, your retirement savings will be ₹ 44 lakh at a rate of 8% or ₹ 31 lakh at a rate of 4%, by the time you are 60 years. However, if you had started saving the same amount from the age of 40, your retirement savings at 60 would be ₹ 74 lakh at 8% interest rate and ₹ 46 lakh at 4% interest rate.
Increasing Inflation
After retirement, you will need regular income to meet your expenses. The later you start saving for your retirement, the more you will need to save. For example, if your monthly expenses are ₹ 35,000 at the age of 30, then by the age of 60, they will be ₹ 2.66 lakh## due to inflation. To meet these expenses, your retirement savings will need a monthly contribution of ₹ 27,000. However, if you delay your savings by just five years, this amount will increase to ₹ 42,500 per month. ##Assuming inflation at 7%
Calculate NowHow do pension plans work?
Upon retiring, your regular income flow dries up and meeting day to day expenses can become a problem. A pension plan ensures that your income flow continues well beyond your retirement. Pension plans let you accumulate a corpus of funds through a lump sum investment or premiums that you pay over a period of time. Upon retirement, you receive regular payments from your corpus to ensure that the expenses can be met and your future is secure.
Types of pension plans in India
Immediate Annuity
Your pension begins almost immediately after a policy is purchased and a lump sum amount has been deposited by you.
Deferred Annuity
You may have a few years before you retire and are looking to secure your post-retirement years with regular income. Deferred annuity option provides you the flexibility to defer your annuity (pension) payouts (for life) after a specific deferment period, chosen at inception. The annuity rates are locked in for life. Premiums can be paid either as a single premium or regular premiums.
Joint Life Annuity
Your pension is paid to you for your lifetime. In case of an unfortunate event, your spouse is entitled to the pension.
National Pension Scheme
Managed by the central government, you can invest regularly to build a corpus, at the time of maturity you can withdraw up to 60% of the amount as lump sum and purchase an annuity plan with the remaining corpus to receive lifelong income.
COMP/DOC/Dec/2021/2012/7105
Benefits of pension plans
Regular Income Post Retirement
You receive a guaranteed amount of money on a regular basis after you have retired from work.
No-Risk Investment
Pension plans provide you with unconditional protection from any and all investment risks.
Insurance Cover
Most pension plans have an included insurance cover that protects you and your family from any possible financial burdens.
Option to Add Riders
You can enhance your pension plan by adding certain riders like ‘disability due to accident’ or ‘critical illness’.
Tax Benefits
Depending on the policy chosen by you, there are certain tax benefits and exemptions that you can avail of**.
More information about pension plans
Eligibility criteria for Pension Plans
Minimum and Maximum Entry Age
For most pension plans, the minimum age of entry is generally 18 while the maximum entry age is 70.
Annual Premium Amount
There is no maximum limit, and the minimum annual premium amount is close to ₹ 50,000/- in most cases.
Minimum and Maximum Vesting Age
The minimum vesting age is 30 years while the maximum age is 80 years.
Premium Payment Term
Generally, the premium has to be paid for the same period as that of the chosen policy term.
Policy Term
Depending on the chosen pension plans the policy term generally ranges from 10 years to 30 years.
Documents required to buy a Pension Plan in India
AGE PROOF
Birth Certificate / Passport / Driving License / Voter ID Card / High School Certificate
IDENTITY PROOF
Aadhaar Card / Passport / Driving License / Voter ID Card / PAN Card
ADDRESS PROOF
Aadhaar Card / Passport / Driving License / Ration Card / Electricity Bill / Telephone Bill
INCOME PROOF
Bank Statement Slip / Salary Slip / Income Tax Return File
MEDICAL REPORTS
Some insurance providers may ask for medical reports before you can buy a pension plan
Pension Plans/Retirement Plans FAQs
A pension is a fund into which a sum of money can be added during your employment years and you can draw periodic payments from this fund once you have retired. This way, a pension continues to provide an income to support you even after your retirement.
Your pension is calculated on the basis of your gender, savings accumulated, age at which the pension starts and mode of annuity.
Yes. A person can have multiple pension plans with private banks and other commercial pension plan policy providers. However, when it comes to the National Pension Scheme or other pension schemes by the Government of India, a person cannot have more than one.
Yes, you can change the nominee of the retirement policy anytime during your life.
Depending on the type of plan chosen, pension plans in India provide certain tax benefits. In most cases, any contributions towards a pension fund can be deducted from your gross income leading to tax savings. At the time of maturity, you can also withdraw up to 60% of your accumulated corpus without paying any tax**.
You can pay retirement plan premiums electronically using Net Banking, Credit or Debit Cards, Payment wallets, ECS linked payments and even through cheque deposits.
A participating plan enables the policyholder to share the profits of the insurance company in the form of bonuses or dividends. In a non-participating plan, the profits are not shared and no dividends are paid to the policyholder. Both these types of plans provide guaranteed life cover.
You can start saving for your retirement as early as you start earning. This ensures that there is no stress during the latter half of your working life. Investment for your child’s education can start from the child’s birth and can run parallel with the investment for retirement.
Customer Review Form
People like you also read ...
