Types of Pension Plans in India

Types of Pension Plans in India

Retirement is an unavoidable part of life, so preparing for it is necessary. Retirement planning is one approach to ensure that you have a secure and dignified retirement. Whatever your dream retirement looks like, whether it’s a relaxing period at home with loved ones or one full of excitement and travel, you need constant money.

The best retirement plans in India assist you in building a corpus large enough to provide steady income flow and meet life emergencies without impacting your lifestyle. Regular monthly allocation of funds implies that you can establish a significant portfolio thanks to the power of compounding. However, it is critical that you choose the appropriate policy for your needs from the various options available.

Types of Pension Plans

Setting aside money every month and investing to reach your retirement fund goal is the essence of retirement plans. The approach you take depends on your set goal, income, and age. The sooner you begin, the better for you in the long term. However, successful pension planning is unattainable without a good plan. Based on the plan benefits and structure, these plans fall into nine categories. Let’s take a closer look at each of these:

Deferred Annuity

A policyholder in a deferred annuity pays a single premium or regular monthly payments during the policy period to create a sizable retirement corpus. The scheme also provides tax advantages to policyholders who are entitled to regular payouts after the accumulation term. There are four types of deferred annuities, these are:

  • Fixed deferred annuity
  • Variable deferred annuity
  • Indexed deferred annuity
  • Longevity deferred annuity

Annuity Certain

In an annuity, a policyholder receives a set of instalments for a specified period. It is not intended to last a lifetime but rather for a predetermined tenure chosen by the insured. An annuity certain often pays a better rate of return in comparison to a lifetime annuity since it has a fixed expiration date. In addition, a beneficiary receives the benefits if the policyholder dies.

Immediate Annuity

The most basic kind of pension scheme is an immediate annuity. First, you make a single lump-sum payment. Then, it is converted into a continuous, guaranteed income stream for a set amount of time or the rest of life.

With and Without Cover Pension Policy

With a life cover plan, the policyholder’s nominee receives the lump sum money provided in the event of the insured’s untimely death. Without a life cover policy, the nominee gets only the premiums paid, with no guarantee of the sum assured.

Guaranteed Period Annuity

Under this retirement plan, a policyholder receives an annuity for a set period, such as 5, 10, 15, or 20 years. It makes no difference whether or not the insured survives that period.

Life Annuity

In this pension policy, the annuities are payable to the insured till death. If the policyholder has chosen the spouse option, they are also entitled to the annuity following the insured’s death.

National Pension Scheme

A Central Government pension plan is available to employees in the corporate, public, and unorganized sectors. Employees can invest a set sum in the scheme at scheduled intervals during their working years. They are entitled to a partial withdrawal at retirement, with the remainder paid back in monthly instalments.

Pension Funds

In such schemes, both the employer and the employee contribute to the fund. Thus, it is for the long term and provides better rewards upon maturity.

Whole Life ULIPs

The ULIPs provide the policyholder with investment options and life insurance coverage for the rest of their lives. After retirement, a partial withdrawal is permitted, with the remainder paid back to the policyholder in instalments.

In India, you can compute the premium amount using an online pension calculator. You can choose the best pension scheme from the various options available in the market based on your needs.

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