Retirement is a word that everyone yearns to achieve for most parts of their lives. It is the sweet harvest of years of hard work where we wish to finally unwind from all the responsibilities and enjoy the fruits of our labor. As tempting and promising as it sounds, retirement is only sweet until you are financially stable enough to support your needs once a regular income stops being credited to your account. This is when old-age pension plans come in.
A planned retirement is quintessential to maintaining a lifestyle that supports all your expenses and fulfilling your life’s leisurely wishes. One can plan for a comfortable retirement in their young years by investing in old age pension plans at an early age.
What are Old Age Pension Plans?
The old age pension plans are devised to cater to the retirement needs of individuals. They are a type of investment plan where one can save for a particular period of time to get a regular income post-retirement. This ensures a regular flow of income while you are actively not involved in doing any earnings. One of the most popular old age pension plans is the Public Provident Fund.
The Old Age Pension Plans are the most sought investment plans if you wish to have a leisurely retirement. And the best part about them is their compounding power. Like any other type of investment, the earlier you start, the more benefits you can reap. There are many Old Age Pension Plan Benefits, the most lucrative being its ability to even rise above inflation. The reason for this is the corpus accumulated by retirement age, which can further take care of the healthcare and lifestyle requirements.
Who can Invest in Old Age Pension Plans?
Anyone can go for Old Age Pension Plans and Its Post-Retirement Benefits. A pre-understanding of your financial goals and a thorough understanding of all the plans available in the market can be the first step to start investing in Old Age Pension Plans.
Types of Old Age Pension Plans
There are many types of old-age pension plans available in the market. Let’s skim through them:
1. Immediate Annuity
This type of pension plan allows you to deposit a lump sum amount, and the pension starts instantly depending on your lump-sum amount. The premiums you’ll pay for the Vridha pension are also given a tax waiver.
Additionally, in the instance of the policyholder’s death, the money goes to their nominees as per their plan. Immediate annuity plans are available in different annuity options:
- Life Annuity
Under this category, the pension is given to the annuitant till their death. However, if the policyholder adds their spouse to the policy, the Old Age Pension Plan Benefits are also assigned to their spouse.
- Annuity Certain/ Guaranteed Period Annuity
Under this category, the policyholder will get their annuity only for a specific period of time. The policyholder can select the period of time, but if they die before the policy period, their nominee can get the Old Age Pension Plan and Its Post-Retirement Benefits.
The annuity provided under these plans varies from different periods of time. One can opt for 20,15,10 or 5 years to reap the Old Age Pension Plan and Its Post-Retirement Benefits.
2. Deferred Annuity
In this type of pension plan category, the corpus gathers through single or regular premiums gathered throughout the policy period. The Old Age Pension Plan Benefits start as the policy term ends. There are many benefits that this type of plan offers, the major being tax exemption.
3. National Pension Scheme (NPS)
The Indian Government launched the Nation Pension Scheme for everyone to get their Old Age Pension Plans and Its Post-Retirement Benefits. This plan helps the common man accumulate some amount they can use in their old age.
One can put their money in the equity and debt markets as per their preference. Additionally, they can withdraw up to 60% of the invested amount at retirement, and the rest 40% can be used to buy the annuity.
A thing to note here is that the maturity amount is liable for tax.
Old Age Pension Plan Benefits
Retirement is a significant life milestone that often comes with the challenge of maintaining one’s desired lifestyle without a regular income. This is where pension plans step in to provide a solution.
Old Age Pension Plan Benefits are a way to secure a guaranteed income even after retirement, allowing individuals to enjoy financial independence during their golden years. But before you jump into a retirement plan, it’s essential to understand its various aspects and make informed decisions.
Let’s break down some key points about pension plans in simple terms.
1. Choosing the Right Plan and Calculating Your Retirement Corpus
Old Age Pension Plans ensure you have a steady income stream when you retire. By selecting the right plan, you can maintain your lifestyle even when you’re no longer earning a salary.
You can use a retirement calculator to find the right plan for you. This tool helps you estimate how much money you’ll need for retirement based on your current expenses, future goals, and expected inflation. It’s like planning ahead to make sure you’ll have enough money to cover your needs.
2. Liquidity: Access to Your Money
The design of pension plans is to provide long-term financial security, but they might have limitations when it comes to accessing your money quickly. However, in some cases, specific plans allow you to withdraw funds even before your retirement age.
This feature can help you to prepare for unexpected expenses or emergencies. It’s like having a safety net in case you need extra funds for unexpected situations without needing to borrow from a bank.
3. Death Benefit: Guarantee for Your Loved Ones
Many pension plans offer a guaranteed death benefit. This means that if something happens to you before your pension tenure ends, your chosen nominee (usually a family member) will receive a payout.
This payout is often a certain percentage, like 105%, of all the premiums you’ve paid into the policy until that point. It’s like ensuring your loved ones have financial support even if you’re not around.
4. Tax Benefits: Keeping More of Your Money
You might be eligible for tax benefits when you pay premiums for your pension plan. This means the money you put into the plan can be deducted from your taxable income.
It’s a way to reduce the amount of money you owe in taxes, which leaves you with more money in your pocket. Specific sections of the Income Tax Act outline these benefits, such as sections 80C, 80CCC, and 80CCD.
5. Payment Period: Receiving Your Pension
The payment period is the time when you start receiving your pension payments after you retire. For example, if you choose a plan where you’ll receive pension payments from the age of 60 to 75, your payment period is 15 years. It’s like getting a regular allowance that helps you cover your expenses during your retirement years.
6. Maturity Age and Accumulation Duration
The maturity age is when you start receiving your monthly pension income. This is the age when your plan becomes active, and you begin to reap the benefits of your investment.
On the other hand, the accumulation duration is the time it takes to build up your retirement savings. If you start investing in a pension plan at 30 and continue until you’re 60, your accumulation duration is 30 years. It’s like patiently saving and watching your money grow over time.
Best Pension Plans in India
|Name of the Pension Plan||Entry Age (in years)||Age of Maturity (in years)||Policy Term (in years)|
|Bajaj Allianz Retire Rich||30 to 73
|7 to 30|
|HDFC Life Guaranteed Pension Plan||35 to 65
|55 to 75||10 to 20|
|HDFC Life Personal Pension Plus||18 to 65||55 to 75||10 to 45|
|Aegon Life Guaranteed Income Advantage Insurance Plan||20 to 55||85||85 to entry age|
|Reliance Immediate Annuity Plan||20 to 80||N/A||N/A|
|LIC Jeevan Nidhi||20 to 60||55 to 65||5 to 35|
|LIC Jeevan Akshay VI||30 to 85||N/A||N/A|
|SBI Life – Saral Pension||18 years for Regular Pay
60 years for Single Pay
|40 to 70
|Regular Pay – 10 years
Single Pay – 5 years40
|Bajaj Allianz Retire Rich||30 to 73||N/A||7 to 30
Essential Documents for Purchasing a Pension Policy in India
If you’re considering securing your future with an Old age pension plan, it’s important to know what documents you’ll need to get started. Here’s a simple breakdown of the documents required:
1. Age Proof
To establish your age, you can submit any of the following documents:
- Birth certificate
- Voter ID
- Driving License
- High school marks sheet
2. Address Proof
For verifying your residential address, you can provide any of these documents:
- Electricity bill
- Telephone bill
- Driving License
- Aadhar card
- Ration card
3. Identity Proof
To confirm your identity, these documents are accepted:
- Aadhar Card
- Voter ID
- PAN Card
- Driving License
4. Income Proof
The following documents are accepted to showcase your income:
- Income Tax Return file
- Salary Slip
- Bank statement
5. Medical Reports
In certain cases, insurance providers might request a health check-up report before approving a pension plan proposal.
6. Submission of Proposal Form
Lastly, you must complete and sign a proposal form. This is an essential step in initiating your pension policy. Preparing the necessary documents will make purchasing a pension policy smoother and more efficient. Consulting your chosen insurance provider for specific requirements is always a good idea.
Tips for Choosing the Right Old-Age Pension Plans
Here are some essential tips to choose the best retirement pension plan for you:
- Plan Ahead
Estimate your future financial needs for retirement and choose the plan accordingly.
- Check Your Finances
Understanding your current income and expenses.
- Know Your Investment Range
Determine how much you can invest consistently without any financial strain on your lifestyle.
- Research Thoroughly
Study the plans available in the market, their benefits, and maturity perks, and choose the one that best suits your needs.
- Look Beyond Cost
Choosing a plan for its tax benefits or low cost is not wise.
Following these tips, you’ll choose a pension plan that suits your retirement goals and financial situation.
Old Age Pension Plans With and Without Cover
With Cover Pension Plan
Under this plan, the policy holds a part of the life cover and gives the lump-sum amount to the nominees or the policyholder’s family after their death. The cover amount is not great in this type of Old Age Pension Plan, as a major chunk of the amount is invested in the corpus growth rather than risk cover.
Without Cover Pension Plan
No life cover is provided under this plan. This means the nominee benefits from the accumulated corpus in the instance of the policyholder’s death.
Investing in pension funds is one of the best Old Age Pension Plans. Old Age Pension Plans and Its Post-Retirement Benefits stay relevant for extended time periods and offer great returns on maturity.
Old Age Pension Plans are essential for securing your retirement financial future. Old Age Pension Plan Benefits include:
- A guaranteed income stream.
- Tax benefits.
- Options to ensure your loved ones are taken care of.
By understanding the critical aspects of pension plans, you can make informed decisions that align with your retirement goals and lifestyle aspirations. Remember, planning ahead is like giving yourself a gift of financial peace of mind for your golden years.
Old Age Pension Plans and Its Post-Retirement Benefits – FAQ
What are the Old Age Pension Plan Benefits under Indira Gandhi National Old Age Pension Scheme?
Ans: The beneficiaries of 60-79 years are entitled to a monthly pension of Rs. 200, and beneficiaries over 80 get a pension of Rs. 500. The pension plan amount is directly credited to the beneficiary bank account or post office account.