Different Pension Plans for Retirement Planning

A pension plan is a useful savings tool during your employment years that helps accumulate a fund for your retirement. An investment in a pension plan will help you pay all your expenses and manage a financially comfortable and peaceful life in the future. There are different kinds of pension plans in India that help you save money and lead a worry-free retired life. You can use the best pension plan calculator to know which plan is the best one for you.

Pension Plans for Retirement Planning:

1. Deferred Annuity Pension Plan: The annuitant either makes a one-time payment or regular monthly premium payment to build a corpus during the policy term. The insurer provides a lump sum amount as a deferred annuity or regular income from the maturity date. The returns are guaranteed and qualify for tax benefits.

2. Immediate Annuity Pension Plan: In this pension plan, the annuitant pays a lumpsum amount and starts receiving the annuity immediately. The income can be received monthly, quarterly, half-yearly, or annually as selected by the annuitant. The premium paid qualifies for tax exemption.

3. Certain Annuity Pension Plan: According to this plan, the period for paying the annuity to the annuitant is fixed. The individual will receive the annuity during this period as chosen by them, and in case of their untimely demise, their nominee will receive the pending annuity amount.

4. With Cover Pension Plan: Under the with-cover pension plan, a small portion of the amount goes towards the life cover, and the rest is used for the annuity. When the policyholder meets with an unexpected death, a lumpsum amount is provided to the nominee. A with-cover pension plan can be considered as the best retirement pension plan.

5. Guaranteed Period Annuity: Under this scheme, the annuity is paid until the completion of the guaranteed period. The period of an annuity can be 5, 10, or 15 years, etc., even if the annuitant is no more. The annuity is stopped either on the death or if the guaranteed period completes, whichever comes later.

6. Life Annuity Pension Plan: According to this plan, the annuitant receives a pension till their death. The plan can be extended to include the spouse and enable them to receive the annuity in case of the policyholder's death.

7. Whole Life ULIPs: A whole life Unit Linked Insurance Plan is a pension plan where the money is invested throughout the insured’s lifetime, and after their retirement, the insured can withdraw partial funds and avail of the applicable tax benefits. One can also make additional withdrawals if needed.

8. Defined Benefit Pension Plan: This is a pension plan wherein the pension amount is provided by the employer to the employee. The employee gets a regular pension amount, lump sum, or a combination of both. The benefit is calculated as per the employee's age, work, service tenure, and earnings. If there is a lack of funds to provide for those covered under the plan, the employer pays for any difference in the amount.

9. Defined Contribution: These plans involve a joint contribution from the employer and the employee. An account is set up to which a specific amount from the employee's income is transferred, and the rest of the amount is paid by the employer. The fund accumulated plan can be used for retirement benefits.

10. National Pension Scheme (NPS): It is a government-sponsored pension scheme where a person availing of this scheme contributes an amount to the pension account. As per the policyholder’s preference, the money invested in the scheme is either invested in debt funds or equity funds. At retirement, the individual can withdraw 60% of the amount and use the other 40% to buy the annuity. It is to be noted that the maturity benefit is taxable.

Pension plans are necessary to tackle all kinds of emergencies, especially medical ones. Inflation definitely influences our income, investment and financial commitments. Therefore, it is better to be precautious and save a robust corpus for the retirement years.

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Doesn’t the thought of retirement sound blissful? No work, no deadlines, and all your hours spent doing the things you love, like travel, painting, and even napping in the afternoon! If you want your retirement to be what you have always dreamed of, start retirement planning now and save a considerable retirement corpus in time. The online Retirement Calculator can help you plan your future financial goals and ensure you achieve them within the stipulated time.