How to Plan Retirement Without a Pension

In India, only a small percentage of the workforce has the comfort of a traditional, guaranteed^# pension (defined benefit plan). If you are a private employee without mandatory Employees' Provident Fund (EPF) membership, or are self-employed running your own business, you are entirely responsible for building your own retirement corpus. This reality requires a proactive and disciplined approach to retirement planning from day one.

The good news is that the best retirement plan for private employees isn't about finding a single scheme; it's about combining structured, tax-advantaged accounts with guaranteed^# insurance products. Here is your blueprint on how to retire without a pension by leveraging the strongest financial tools available in 2025.

The Essential Government-Backed Accounts

For any Indian citizen, the National Pension System (NPS) and the Public Provident Fund (PPF) are the foundational, tax-advantaged retirement accounts that must be utilized, offering stability and growth.

The National Pension System (NPS) and the Public Provident Fund (PPF) are the most essential government-regulated retirement accounts for self-employed individuals and private employees to ensure tax-efficient, long-term savings.

National Pension System (NPS) - The Growth Engine

NPS is a hybrid, market-linked retirement scheme regulated by PFRDA that is open to any Indian citizen. It's the primary answer for how to retire without a pension due to its long-term wealth creation potential.

• Equity Exposure: Following PFRDA's Multiple Scheme Framework (MSF) launched in October 2025, NPS now allows subscribers to opt for up to 100% equity exposure⁽¹⁾, which is critical for generating inflation-beating returns over a 20+ year horizon.
• Superior Tax Benefit*: Contributions qualify for the basic Section 80C benefit, plus an additional exclusive deduction of up to ₹50,000 under Section 80CCD(1B)(3). This extra deduction is a powerful incentive to save more for retirement.
• Exit Rule: At retirement (age 60), up to 60% of the corpus can be withdrawn tax-free, but the remaining 40% must be used to purchase a mandatory annuity plan (pension)⁽³⁾.

Public Provident Fund (PPF) - The Safety Net

The PPF is a debt-based, government-backed account that guarantees returns and triple tax exemption (E-E-E).

• Fixed Return: The interest rate is declared by the government quarterly (currently 7.1% for Q2 FY 2025-26)⁽²⁾, offering guaranteed^#, low-risk returns.
• Tax-Free Exit: The entire corpus, including all interest earned, is 100% tax-free upon maturity (15-year lock-in period).
• Ideal Role: PPF should be used to accumulate the safe, non-negotiable portion of your retirement corpus, particularly if you have a low-to-moderate risk appetite.

Annuity Plans: Securing Your Monthly Income for Life

Since you don't have a guaranteed^# corporate or government pension, you must create one. Insurance companies offer Annuity Plans designed specifically for this purpose. The most effective way to secure a lifelong income and address the longevity risk (outliving your savings) is by purchasing a Deferred Annuity Plan, which converts a lump sum into a guaranteed^# monthly income.

Deferred Annuity - The Self-Built Pension

A Deferred Annuity Plan allows you to pay premiums over your working life (the deferment period). When you retire, the accumulated corpus is vested, and you begin receiving a guaranteed^#, fixed monthly payout for the rest of your life.

• Guaranteed^# Payout: Unlike market investments, the annuity rate (or payout percentage) is often guaranteed^# at the time of purchase or vesting, ensuring predictable monthly expenses after retirement.
• Longevity Protection: This plan eliminates the fear of running out of money, as the income continues for your entire life (and often the life of your spouse under a joint-life option).
• Annuity Taxability: Premiums are tax-deductible under Section 80C, but the annuity income received as a monthly payout is considered regular income and is fully taxable as per your slab rate ⁽⁴⁾.
• Role of ABSLI: ABSLI offers various Deferred Annuity and Pension Plans that serve as the closest equivalent to a traditional pension for the self-employed and private sector professional.

Guaranteed^# Savings Plans - Capital Protection

Consider adding Guaranteed^# Savings Plans to your portfolio. These products offer capital protection plus a declared guaranteed^# addition or return.

• Risk Mitigation: These plans reduce the overall market risk in your retirement portfolio while still benefiting from tax deductions under Section 80C. They provide a safe haven for funds earmarked for retirement that are close to maturity.

Building the Corpus: Strategic Investment & Calculation

The biggest challenge in retirement planning for private employees is generating the necessary ₹5 Crore to ₹10 Crore retirement corpus often required to sustain a comfortable urban lifestyle, factoring in 6% inflation.

You must use the Systematic Investment Plan (SIP) method in equity mutual funds to ensure your investments grow at an average rate of 10% to 12%, which is necessary to overcome long-term inflation.

1. Calculate Your Target Corpus Use this formula, incorporating current cost of living data (e.g., Mumbai average is ₹30,000 to ₹60,000 per month). Example: If your projected annual expense at retirement is ₹24 Lakh (after adjusting for inflation), your required retirement corpus is calculated as: ₹24 Lakh / 0.04 = ₹6 Crore.

2. Implement a Structured SIP After calculating the target corpus, use an online calculator to determine the required monthly investment.

• Strategy: Implement an aggressive SIP into diversified equity mutual funds, aiming for returns above the 6% inflation marker. This fund will build the growth component of your corpus, acting as your primary wealth generator.
• Regular Review: Review your asset allocation and monthly expenses after retirement projection every two to three years, adjusting your SIP contribution upwards as your salary increases.

3. De-Risk Closer to Retirement As you enter the final five to ten years before retirement, systematically transfer funds from high-risk equity (NPS Equity, Mutual Fund SIPs) into safer, fixed-income assets (like PPF, FDs, or Deferred Annuity Plans). This protects the accumulated corpus from sudden market crashes just before retirement.

Conclusion

Retirement planning for private employees and the self-employed is an exercise in self-reliance and intelligent asset allocation. By treating NPS and PPF as your essential tax and debt anchors, and using Deferred Annuity Plans from ABSLI to convert your eventual lump sum into a guaranteed^# income, you can successfully retire without a pension. Start the compounding engine early, be disciplined with your SIPs, and actively manage the balance between market growth and safety.