Along with your corporate life, you must plan for your retirement in advance. In a country like India, there aren’t many initiatives focused on the social security and financial security of senior citizens. Moreover, as inflation keeps rising, you would need to start preparing your retirement plan early.
Often known as retirement investment schemes, pension plans provide you combined benefits of insurance cover and investment. It works on the concept of accumulating a surplus sum in an orderly manner towards your pension plan by investing small amounts timely.
With the help of pension plans, you can maintain a steady flow of income after you’re no longer working. Furthermore, with the power of compounding, you can even beat inflation with the help of carefully chosen pension investment plans like the Canara HSBC Oriental Bank of Commerce – Pension 4Life Plan.
Who Should Purchase Pension Plans?
Every individual looking to make their retirement life financially secure must invest in pension plans. According to section 80C of the Income Tax Act, a lot of retirement plans are eligible for tax deductions of up to 1.5 lakhs INR.
The plan you’re looking forward to choosing should also resonate well with your retirement plans. If you want to take a permanent break from work earlier in your life, you need to make sure that the maturity corpus is sufficient enough to cater to your needs.
Benefits and Features of Pension Plans
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Efficiency in Tax
Several pension plans offer tax exemption benefits according to the Income Tax Act of India. Under chapter 4-A of this act, if you’re willing to invest your capital in a pension plan, you can enjoy several tax respites.
Read more about the exemptions in detail, on sections 80C, 80CCC, and 80CCD. Some common retirement planning schemes that are eligible for tax deduction schemes are National Pension Scheme and Atal Pension Yojana.
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Vesting Age
Your age when the investment plan begins offering you payouts is known as vesting age. On a general note, the minimum vesting age for most insurance providers may lie between 45 and 50 years.
If you wish to work longer, you can stretch it up to 70 years, and a handful of companies also allow you to keep the vesting age as long as 90 years. However, it is important to determine a vesting age that allows you to make the most of your plan upon its maturity.
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Surrender Value
No matter what you do, make sure that you never surrender your pension plan before it gets mature unless there’s no alternate option left. That’s because surrendering a scheme means losing all of its benefits, including the insurance cover and the assured sum.
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Duration of Accumulation
When you purchase a good retirement planning scheme like Canara HSBC Oriental Bank of Commerce Pension 4Life Plan, you can either pay your premiums as a lump sum amount at once or accumulate it in periodic intervals – it’s all up to you. Regardless of the payment preference you choose, the wealth will grow with time to help you build a large corpus.
To understand it better, let’s take an example – if you begin investing in a pension plan at the age of thirty, and keep paying your premiums until the age of sixty, your duration of accumulation will be thirty years in which all you do is expand your corpus.
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Guaranteed Income
After you retire from your primary profession, a pension plan makes sure that you receive a steady and fixed amount of income. It can also start immediately if you choose to invest in an immediate plan based on your financial capabilities.
The plan ensures a financial safeguard for your retirement life and allows you to make independent financial decisions. To determine how much amount you need after retiring, you need to keep in mind your current living standards and daily expenses.
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Liquidity
Although pension plans are often known to be low-liquidity products, some plans allow you to withdraw while you’re in the accumulation period. This allows you to regain your funds in case of any emergency, without relying on banks for financial loans.
Types of Pension Plans in India
- Life Annuity – It’s a pension plan that pays you off until you die, and also allows you to include your spouse in the cover. In case you die due to unfortunate circumstances, your spouse will still receive the benefits of this policy.
- Immediate Annuity – This pension plan requires you to pay your premiums at once using a lump sum amount of money. Moreover, you start receiving the income almost immediately, along with several tax deduction and exemption benefits
- Deferred Annuity – With this retirement planning scheme, you can either pay a lump sum or continuous payments, and the benefits can be enjoyed after you’ve retired from your job. Withdrawing the corpus may lead to you not being able to enjoy any benefits.
- Annuity Certain – In this plan, the pension is distributed evenly for a specific period that can be chosen by the policyholder. In case of the policyholder’s demise, the plan offers the pension to the nominee.
- Pension Funds – This plan offers good returns upon its maturity, and it’s completely regulated by the Governmental Authority known as Pension Fund Regulatory and Development Authority of India. As of now, there are only six fund houses that provide pension funds including SBI.
- National Pension Scheme – This plan is launched specifically by the Central Government of India. In this plan, your funds are distributed in debt and equity markets, as per your requirements. It offers 60% returns at the time of retirement and the rest of the funds will be used in purchasing an annuity.
The Takeaway
Once you’ve retired, it’s your turn to sit back and relax, and to enjoy the true essence of life. However, to make sure that you don’t have to keep working at the age of retirement, you must consider investing in best pension plans.
Along with income benefits, these plans are also eligible for tax savings and deductions that make your finances even stronger. Therefore, make sure you compare plans and choose the one that fits the bill for you.
