Pension plans, also known as retirement plans or superannuation plans, are in essence investment plans that let an individual allocate a significant portion of savings over a considerable period of time in order to provide the superannuated with steady financial security after his or her retirement.
Most of the times, people tend to avoid elucidating retirement plans as they believe they have saved enough to last their requirements through the entire old age. However, it must be understood that no matter how abundant one’s savings, they tend to get exhausted very fast. One cannot help avoiding unprecedented emergencies during which most of the saved funds may be unintentionally used up.
Therefore, in case such a financial paucity arises, having a good pension plan would be of great help to the individual.
How to Choose the Most Appropriate Pension Plan?
- First and foremost, in order to click on the correct pension plan, it is most important to clearly understand one’s needs. The concerned individual should be able to decide how much he or she would need for adequate sustenance in the future, keeping in mind the prospects of inflation.
- Secondly, a comparative research would be of great help. One should pore over the pension details and undertake a thorough study of the sundry pension plans offered by various companies.
- One should not give in to blindly following someone else’s advice, however plausible it might seem. The advantage of a thorough research comes right here. Not all products would suit everyone. Therefore, it is of increasing importance that one sticks his more urgent preferences. As may be inferred, this is a realm of high subjectivity.
- Needless to say, income tax benefits form a very crucial part. However, tax benefits alone should not be the goal. A one-eyed survey might end up a very limited savings corpus. Therefore, the planners are always advised to look at the overall picture.
Different Types of Pension Plans in India
- Deferred Annuity: So far as the different pension plans are concerned, the first would be the deferred annuity. It allows one to build up a sturdy retirement corpus through regular premiums or even a single premium over a particular policy cover. Given the merits of the deferred annuity, they are huge and also entail huge tax benefits.
- Immediate Annuity: As the name suggests, in this plan the pension starts immediately. One has to shell out a lump sum amount, and the pension will start instantly. In the plan, the premiums paid are exempt from tax. After the death of the policyholder, his or her nominee will be entitled to the money.
- ‘With Cover’ Pension Plan: In this plan, a life cover is provided. This necessarily implies that on the decease of the policyholder, his or her family members shall be entitled to the money. However, it must be noted; the cover amount is not very high.
- ‘Without Cover’ Pension Plan: So far as the ‘Without Cover’ Pension Plan is concerned, it does not offer a life cover. In the event of the decease of the concerned policyholder, the nominee will be entitled to the corpus till the date of the death. At the present date, it must be noted; deferred plans are ‘with cover’ while immediate plans are ‘without cover’.
- Annuity Certain: According to the clause of this particular plan, an annuity is shelled out to the concerned annuitant for a particular number of years. The period can be chosen by the annuitant. In case the annuitant dies, the amount will be disbursed to the relevant beneficiary.
- Guaranteed Period Annuity: In this plan, the annuity amount is given to the life assured for certain periods like five, fifteen or twenty years. The plan is independent of whether the annuitant survives during these periods.
- Life Annuity: According to this pension plan, the annuity will be shelled out to the annuitant until the date of death. In case of death, the amount will be given to his spouse.
- Pension Funds: As far as pension funds are concerned, the Pension Fund Regulatory and Development Authority has allowed a string of six reputed companies in order to act as relevant fund managers.
When an individual continuously invests in pension plans, the amount
increases manifold which ends up making a startling difference in the final
savings body. Having the most appropriate pension scheme helps the individual
plan his or her retirement in more far more phased and organized manner. Here in India, you can compare various insurance companies to choose the best pension plans. Some of the best plans from companies are LIC pension plan, HDFC pension Plan etc.