Retirement/Pension Plan Get The Best Returns & Make The Most Of Your Golden Years
Retirement planning is a critical aspect of life that often requires thoughtful consideration and strategic decision-making. As we envision our golden years, a well-crafted retirement plan becomes essential to ensure financial security and independence during post-work life. This article explores the significance, types, and benefits of retirement plans, providing valuable insights for those contemplating their future.
- Safeguards Your Life After Retirement
- Secures You Financially During Retirement
- Helps Build A Corpus
- Wide Range of Annuity Options to Choose
Guaranteed Income for Whole of Life-Lead Form
What is Retirement/Pension Plan?
Pension Plans, also known as General Annuity plans, are retirement savings tools that help you generate a steady post-retirement income. A pension plan is a financial product where you build a fund through regular payments or lump sum. They let you accumulate funds over a period of time, which are later converted into guaranteed post-retirement income.
Before exploring the pension plans and making investments, it is essential to understand the two phases of pension plans as follows:
Phase I (Accumulation): During the accumulation phase, you regularly invest money into your pension fund. When you pay the premium regularly, it gets invested in a fund or asset of your choosing for a fixed term.
Phase II (Vesting): Once you retire and start receiving a steady income from your pension plan, you enter the vesting phase. When the vesting period arrives, you will have two options. You can either begin receiving the pension benefits or withdraw the proceeds and purchase an immediate annuity plan from the same company. The Vesting phase is also called the maturity period.
| 3 Types of Retirement Plans | How They Works |
|---|---|
| Single Premium Annuity Plan | You make a single lump sum investment and once you retire, you receive a regular income. |
| General Annuity Plan | You invest money in the plan regularly for a certain period. The accumulated money is converted into a stable income. And it's paid to you periodically- during your retirement years. |
| Pension Accumulation Plan | You pay premiums for the plan during the policy term. The accured money becomes a pension fund, which is paid to you as a lump sum when you retire. |
Need and Importance of Retirement Plan
Delving deeper into the need and importance of retirement planning, this section emphasises the pivotal role it plays in setting long-term financial goals.
Increasing Retirement Years
With average life expectancy increasing in India, it has become increasingly important to plan for a longer retirement. An average Indian lives up to the age of 75-78 years. Hence, you need to start planning in advance to maintain your lifestyle and take care of other expenses for such a long duration.
Medical Inflation
A major worry with increasing age is unforeseen medical expenses. Rising medical costs can be difficult to manage unless you plan for them in advance.
Unexpected Events
Life is unpredictable, and unforeseen circumstances such as medical emergencies or job loss can impact your retirement plans. By starting early, you can build an emergency fund and have a safety net in place to handle any unexpected expenses.
Financial Independence Post Retirement
You would like to live your life on your own terms after your retirement. However, maximum individuals above the age of 60 depend majorly on their childrens for their daily expenses. This shows how important it is to plan for your retirement and ensure your financial independence.
Peace of Mind
It ensures financial independence, capitalises on compounding, allows manageable contributions over a period of time. These plans helps initiate planning today for a worry-free tomorrow, thus bringing peace of mind
Flexibility and Options
Early retirement planning provides more flexibility in choosing investment options . It gives advantage to long-term investment, which generally offers higher returns over time.
Types of Pension Plans
A wide range of pension plans in India are available to cater to the insurance seekers' requirements. Below are the details :
National Pension Scheme
Introduced by the Government of India for securing the individual's financial future after retirement.You may opt for this scheme if you are early on in your career and have a long time ahead for your retirement.
Pension Fund
Long-term pension scheme regulated by the Government under the Pension Fund Regulatory and Development Authority (PFRDA). It offers better returns upon maturity compared to other plans. Policyholders can withdraw their annuity sum during the aggregation stage, providing financial security in emergencies.
Life Annuity
Pension is paid to the annuitant until their death. If its opted the option of spouse 'under the life annuity plan, the pension amount is transferred to the policyholder's spouse in the event of the policyholder's death.
Immediate Annuity
Annuity is payable immediately, as per payment frequency chosen, at a constant rate in arrears. Premium is paid in lump sum at the beginning of the annuity plan.
Deferred Annuity
An annuity is payable post Deferment Period, as per payment frequency chosen, at a constant rate in arrears. Premium is paid in lump sum at the beginning of the annuity plan.
Annuity Certain
It is a pension plan where the annuitant receives the annuity for a some specific number of years, with the beneficiary receiving the annuity in case of the death of the annuitant.
With & Without Cover Pension
This pension plan includes an insurance cover that entitles a lump sum amount in case of an unfortunate event. In Pension plans without cover, a corpus is provided to the nominee in case of the death of the policyholder.
Guaranteed Period Annuity
Offers annuity payments to the policyholder for specified periods, such as 5 years, 10 years, 15 years, or 20 years, regardless of whether the insured survives that duration.
Eligibility Criteria to Buy a Retirement Plan
Below is the eligibility criteria for purchasing retirement plans in India are: Eligibility Criteria Specifications
| Eligibility Criteria | Specifications |
|---|---|
| Age Criteria | Different insurance companies may have varying age criteria for entry into a retirement plan. Generally, the minimum age is 18, but it's crucial to check specific company policies. Some companies may set the entry age at 30, and the maximum age for eligibility is often around 70 years. |
| Policy Term | Depending on the chosen pension plans the policy term generally ranges from 10 years to 30 years. |
| Premium Requirements | Policyholders need to pay a minimum premium amount to initiate the retirement plan. The premium amount contributes to determining the eventual pension amount that the individual will receive post-retirement. |
| Vesting Age | The age at which the policyholder starts receiving the pension is known as the vesting age. Typically set around 45 years, the vesting age may vary based on company norms. The maximum vesting age, at which the policyholder can start receiving benefits, is commonly set at 80 years. |
| Documentation | To purchase a retirement plan, individuals are required to provide specific documents, including proof of address, age, identity, and income. These documents are crucial for the verification and processing of the retirement plan application. |
Key Benefits of Retirement Plan
Buying a pension plan online comes with a lot of benefits. We have mentioned some high-yielding benefits to give you better clarity why retirement plans work best for you:
Extended Savings Duration
Retirement plans offer the advantage of saving for a more extended period, especially if one starts investing at a young age. This prolonged saving horizon allows for the accumulation of a substantial corpus, ensuring financial security post-retirement.
Independent Decision Making
A well-thought-out retirement plan empowers individuals to make independent decisions about their post-retirement life. It provides the flexibility to choose the desired lifestyle and make financial choices without being dependent on others.
Relieving Burden on the Next Generation
In the era of nuclear families, having a retirement plan helps prevent passing on financial burdens to the next generation. Planning ahead ensures that individuals can manage their expenses independently, providing peace of mind to both retirees and their children.
Protection Against Inflation
Retirement plans act as a hedge against inflation, safeguarding savings from the impact of rising living costs. Whether receiving a lump sum or fixed intervals of payments, retirees can maintain their standard of living even in the face of inflationary pressures.
Tax Benefits
Retirement plans offer tax advantages under various sections of the Income Tax Act. Contributions made towards these plans may be eligible for deductions, and in some cases, the withdrawal of interest is also exempt from taxes, providing an additional financial incentive.
Compound Interest Advantage
The power of compound interest is leveraged in retirement plans, allowing the invested amount to grow over time. Compounding helps in building a more substantial corpus, and individuals can reap the benefits of compounded returns during their retirement years.
Our Preferred Plan
The preferred Guaranteed return plan may vary based on individual preferences and financial goals. Factors to consider include the desired coverage amount, policy term, premium affordability, and any additional features like riders or bonuses.
Smart Guaranteed Pension Plan
- Advantage with Max Life
- Claim settlement Ratio: 99.51%
- Rs 122857 Cr of assets under management as on FY 22-23
- Max Life’s presence in 296 offices
Coverage Benefits
- Guaranteed Income
- Death Benefit
- Top Up option
- Return of Annuity
Guaranteed Pension Plan
- Advantage ICICI Prudential
- Claim settlement Ratio: 98.14%
- Crossed `2.5 trillion of assets under management as on FY 22-23
- 24X7 assistance with their Mobile App
Coverage Benefits
- Guaranteed Lifetime Annuity
- Choose your retirement date
- Top Up Option
- 11 Annuity Options
New Immediate Annuity Plan
- Advantage with HDFC
- Claim settlement Ratio: 99.39 %
- Rs 238782 Cr of assets under management as on FY 22-23
- HDFC Life’s presence is in 498 branches across India
Coverage Benefits
- Single and joint Life option
- Guaranteed Lifetime income
- Return of Purchase price option
- Multiple Payout Mode
Guaranteed Pension Goal
- Advantage with Bajaj Allianz
- Claim settlement Ratio: 99.04 %
- Rs 1,04,493 Crore of assets under management as on FY 22-23
- Bajaj Life’s presence is in 510 branches across India
Coverage Benefits
- Joint Life Option
- Guaranteed Lifetime regular income
- Return of Purchase price option
- Multiple Payout Mode
Lifetime Income Plan
- Advantage with Kotak E term
- Claim settlement Ratio: 98.82%
- Covered 50 million lives nationwide as on 2023
- 24X7 assistance with their Mobile App
Coverage Benefits
- 6 annuity options
- Guaranteed Lifetime Annuity rates
- Single Premium Payment
- Annuity payment Modes available
Inclusion and Exclusions in Retirement Plan
Below are some of the common coverages under retirement plans;
Different Time Periods You Should Know About in Insurance
1. Premium Payment Term (PPT): It is term for payment of premiums and it depends on the plan chosen.
2. Free Look Period: The free look period in life insurance is usually 15 to 30 days from the date of delivery of policy document, depending on the channel through which you have purchased the policy.
3. Grace Period: The insurance grace period is 15-30 days for policies basis the premium payment options like monthly, quarterly , yearly.
4. Revival Period: A revival period refers to the time band allowed by the insurance company to recover a lapsed policy starting from the due date of the first unpaid premium. Typically, this period ranges between 2-5 years and varies across insurers.
5. Deferment Period: The deferment period is the period after which your annuity payouts are made in a deferred annuity plan. The period ranges from 1 year to 15 years.
6. Income Benefit Period: The income benefit period is a feature that offers income benefits. This includes savings plans that offer income payouts as well as retirement plans that offer annuity benefits, the income benefit period of 10, 15 or 20 years basis the plan opted.
FAQ's
As the need for insurance increases, doubts and queries also increase. Navigating insurance complexities can be overwhelming. To help you with this, We have tried to address common doubts for a seamless journey with Bimasure;
Retirement plans involve making premiums for a pre-decided period, and the accumulated fund is received after the plan matures. Options include withdrawing the entire amount, purchasing an annuity plan, or making partial withdrawals.
It is advisable to start retirement planning around 10 to 15 years before the intended retirement age to accumulate sufficient funds for a secure post-retirement life.
Retirement plans offer tax benefits under sections 80C, 80CCC, and 80CCD of the Income Tax Act, providing deductions on contributions and exemptions on interest withdrawal.
Surrendering a retirement plan may incur cancellation fees, and specific conditions apply. Early surrender may require purchasing a deferred or immediate annuity plan.
Surrendering the plan after 5 years may still allow for interest payments. The policyholder may continue to receive the accumulated interest even after surrendering the plan.
Regular monitoring and updates are recommended to ensure the retirement plan aligns with changing expenses and financial goals. Adjustments should be made as needed for optimal benefits. is rooted in the desire for a secure and comfortable post-retirement life. Whether envisioning serene moments with loved ones or aiming for financial independence, a retirement plan serves as a reliable tool to achieve these goals. This section delves into the motivations behind purchasing a retirement plan and the long-term advantages it offers.
