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Regular Income
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Financial security for your family
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Maintain your lifestyle
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Affordable way of Retirement Planning
Retirement Plans
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Benefits of Pension Plans
Regular income
Pension plans provide regular income, which helps take care of your post-retirement needs and aid you in leading a worry – free relaxed life.
Financial independence
Pension schemes help you live life on your terms without depending on your children or relatives and enjoy every moment of it.
Bridge shortfall of corpus
Savings from provident fund and gratuity may fall short in the long run. Pension yojanas help bridge this shortfall, fulfilling your every need during the golden years of your life.
Accumulate wealth
Regular and disciplined investment in pension plans helps you accumulate a sizeable retirement corpus in the long run. This helps you maintain your standard of living and meet post-retirement expenses.
Withdrawal in accumulation stage
Are you worried about an urgent need for funds due to an emergency? Relax. You don’t have to borrow from banks or your relatives. Some pension plans allow partial withdrawal during the accumulation phase, ensuring you have the required money when needed.
Tax Benefits
Premiums paid towards pension plans qualify for tax deduction under section 80CCC of the Income Tax Act, 19611. Also, on reaching the vesting age, i.e., the age when you start receiving the monthly pension, you can withdraw one-third of the retirement savings, tax-free as lump sum under section 10(10A) of the Income Tax Act, 1961. This helps you to save more money.
Things to Keep in Mind While Choosing Pension Plans
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Buy early
Don’t you start early when you want to reach an important destination? Retirement planning is no different. When you buy a pension plan early, you have more time to save and invest to build a substantial corpus.
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Know the corpus you want to build
Knowing the approximate corpus you want to build helps you save and invest accordingly. Factor in your post-retirement needs, number of dependents, inflation and liabilities while figuring out the final corpus amount.
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Type of plan
Do you need pension immediately or after some time? If you need it immediately, you can buy an immediate retirement annuity plan. On the other hand, if you need it after a certain number of years, go for deferred annuity.
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Pension amount needed
Amount of savings required for a pension amount of Rs. 10,000, and Rs. 30,000 differs. Knowing the pension amount needed will help you save and invest accordingly. While figuring out this amount, take into account inflation, which brings down the value of money with time.
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Premium payment period
Being aware of the premium payment period, i.e., the time for which you need pay premiums, helps you to be better prepared with money so that you can pay premiums on time, and enjoy policy benefits.
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Don’t look at only tax-savings
Note that investing is pension schemes only to save tax is not the right approach. The best pension plan not only helps you lower your tax outgo but also help you meet all your financial needs in your retirement years and help you lead a stress-free retired life.
Frequently Asked Questions
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Does pension end after my death?
It depends on the policy’s terms and conditions and is better to clarify the same with your insurer.
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When should I start investing in pension plans?
It is always considered 'earlier the better'. So, start as early as possible so that you have to save smaller amounts from your income while the corpus built can be substantial
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What is the premium amount for retirement plans?
The premium amount for most of the retirement plans is decided by the insurer according to the plan you choose. Various factors like age, lifestyle play a pivotal role in deciding the premium amount.
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Can I invest in multiple pension plans?
Yes, you can. However, note that retirement pension plans are long-term commitment which requires premium payment for a certain period of time. If you have enough income to do so, you can opt for more than one pension plan. If not, it’s advisable to stick to one or two plans at the most.
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What happens to my pension plan if I surrender before maturity?
If you surrender your pension plan before maturity, the entire sum received is added to your income and taxed as per the applicable tax rates. Also, you will lose out on other benefits, including life cover from your policy.
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Are Retirement Plans taxed?
No, the retirement plans are not taxable. However, any withdrawal made can be taxable.
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What is the difference between participating and non-participating pension plans?
In a participating pension scheme, the insurer shares the profits made in the form of bonuses and dividends. This is not the case with a non-participating scheme. Also, a participating pension plan has a higher premium than a non-participating plan.
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What are the tax benefits accompanying pension plans?
Premiums paid towards pension plans qualify for tax benefits1 under section 80CCC of the Income Tax Act, 1961. Death claim proceeds are exempt for taxesin the hands of the nominee and annuity received is taxed as per the existing tax slab.
1Tax benefits are subject to changes in the tax laws. You are advised to consult your tax advisor for the same
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What is the meaning of vesting date?
It’s the date from which you start receiving pension as regular income from your retirement pension plan.
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Why should I buy a pension plan?
You should buy a pension plan to secure your retirement. A pension plan helps you spend your retired life without worries as you receive a regular income. An in-built life cover offers your dependents a financial cushion in your absence.
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What is the main feature of a retirement plan?
The main feature of a retirement plan is the steady and fixed income that it offers that helps you take care of your post-retired needs and aids in providing a stress-free retired life.
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What are the types of pension plans?
Broadly there are two types of annuity pension plans – immediate and deferred. In immediate annuity, you start receiving pension immediately after investing while in deferred annuity, you receive pension after a few years.
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1Tax benefits are subject to changes in the tax laws. You are advised to consult your tax advisor for the same
Disclaimer
For more details on risk factors, terms and conditions please read sales brochure carefully before concluding the sale An extra premium may be charged as per our then existing underwriting guidelines for substandard lives, smokers or people having hazardous occupations etc.
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