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HomePersonal FinanceA Comprehensive Guide to Choosing the Best Pension Plan in India

A Comprehensive Guide to Choosing the Best Pension Plan in India

To be able to financially sustain oneself at a time where they are nearing old age and have a shift in their income; policyholders often choose to invest in Retirement plans well in advance so that their future is secured.

There are many types of retirement solutions that are lauded as the best pension plan in India, where one may choose to invest at certain points in their life with their customised payout methods.

Retirement planning can be defined as the recurrent process of calculating, analysing, implementing, and reviewing income and investment practices of an individual in a manner that is targeted towards them fulfilling their expenses, financial goals, and liabilities while also securing funds for retirement or other long-term monetary needs. Investors often use a variety of planners and tools in the course of retirement planning calculator to find the best pension plan in India.

At the time of retirement, there is a halt in the steady inflow of income over an extended period of time can be detrimental for a person, especially if they are in their old age and predisposed to being vulnerable to illnesses.

Therefore, in order to abate the possibility of such circumstances to occur to a long-serving professional and to incentivise retirement-oriented investment plans; many government and private organisations offer pensions to their retiring employees.

In the event, an individual does not have these pension benefits, or they are falling short when compared to their costs and liabilities; a person can go for a pension plan. Similar to retirement plans, these are investment instruments that can serve as an income replacement to the policyholder, while also giving them the benefits of an insurance policy.

The best pension plan in India and its provisions can be expected to be paid as per an agreement fixed between the employee and the investment provider and the tenure ends when the employee dies, where the assured sum may be processed to a nominee as stipulated by the deceased in their policy.

At an age where they are predisposed to illnesses or injury, not having funds allocated to cover them for the remainder of their post-retirement life can be detrimental. Therefore let us understand the features and benefits one can expect from the best pension plan in India:

1. Flexible Annuity

Annuity is a feature of retirement plans that allows a prospective investor to acquire a sizeable corpus of money through recurrent premium payments over a determined policy tenure. This annuity benefit can vary from policy to policy, since it has to cater to people of all kinds of pension needs. The two most common types of annuity that an investor can access is Deferred Annuity or Immediate Annuity.

A policyholder can choose from a wide array of options where they can either pay premiums over a period of time, or they can pay a single, one-time premium which can yield them their pension with immediate effect.

2. Extended Tenure Security

Plans that are considered as the best pension plan in India, often have a feature where their policy tenure is over an extended period of time. The best pension plan in India allows investors to have an insurance option that guarantees high and steady returns because of their long policy tenures. Hence retirement plans in India have an incentive of starting early, as they allow the investor to have financial security at the time of retirement.

3. Sum Assured Benefits

Pension plans in India offer a promised amount to the investor which is insured for the duration of the policy. This amount is called the sum assured. Insurance providers have a vast and customisable array of options for investors to choose from. One’s sum assured is based on the premium amounts they invest in their policy.

Types of Retirement and Pension Plans Can be divided into Three Categories

Government Retirement Schemes

Funds that are usually availed at government banks and post offices such as the Public Provident Fund, Senior Citizen’s Savings Scheme, National Pension Fund, which are low-risk and tax-free are government-backed schemes.

Employee Benefit Retirement Funds

Many government and private organisations offer pensions to their retiring employees. The pension can be determined by factors such as duration of employment, designation at the time of retirement or other meritorious contributions. A defined benefit and defined contribution plan can be examples of types of retirement plans offered by employers.

Personal Investment/Pension Plans

Insurance-oriented plans such as annuity plans, cover and no-cover plans can be examples of personal pension plans that are chosen by an investor to support them  after retirement

Types of pension plans that can be found in India can be listed below as:

  • Deferred Annuity
  • Immediate Annuity
  • Cover and No-Cover Pension Plans
  • National Pension Scheme
  • Whole Life ULIPs
  • Life Annuity
  • Annuity Certain

Since investing in long-term pension plans is a vital life decision, a policyholder ought to consider the following factors before buying a pension plan:

1. Financial Needs

For a young earning individual the goal may be to grow their capital for more investments, but for a middle-aged person, it may be driven towards post-retirement financial security. For the people falling into the latter category, who rely on their employment for healthcare and other employee benefits and expenses; it is crucial to opt for retirement pension plans.

2. Market-linked Plans and Risk

Different pension plans can cater to different investment needs, from market-related to risk-averse. As aforementioned, retirement can be a daunting time for investor to forego these benefits and meet their expenses with the help of their savings.

With the help of respective pension types, a person will be able to meet their expenses in a seamless and stress-free manner, while also being able to avail tax benefits and more.

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