Types of Pension Plans in India
Whether you are a government employee, a business owner, or work in a private organisation, your life will only be secure when you have a source of income. Thus, it is important to be financially prepared for the after-retirement phase when the possibility of income shrinking is high.
Thankfully there are several pension plans in the market that help you cope with this problem in the later years of your life.
What is a Pension Plan?
Also known as retirement plans, pension plans require employers to contribute to a pool of funds set aside so that the worker is able to secure his/her future financially. The funds are invested by the employer and earnings on the sum invested generate income for life after retirement.
Let us read about different types of pension plans in India.
Types Of Pension Plans In India
There are 8 types of pension plans in India. These are explained below:
1. Deferred Annuity
Deferred Annuity allows you to accumulate a corpus either through regular or single premium payment during a policy term. The pension in this case begins after the term completion. Also note that no tax will be applicable unless you withdraw the corpus.
2. Immediate Annuity
In these plans, only lump sum investment is allowed. Another feature of these plans is that pension begins immediately after investment. The income tax is exempted on the premium paid for these plans. Also, the nominee can claim pension or corpus in case the policyholder dies.
3. Annuity Certain
In these plans, the pension is disbursed for a specific period. These plans allow you to opt for a period of your choice, let’s say 65-70 years. The nominee in this case can claim the pension after the demise of the policyholder.
4. With Cover Pension Plan
The insurance amount in this case is not big and most of the premium goes towards building a corpus. It comes with a ‘cover’ policy where the policyholder’s dependents are liable to get a lump sum in case he/she dies.
5. Life Annuity
In these plans, the pension is paid till death ‘with spouse’ option. The spouse continues to receive the pension even after the policyholder’s death.
6. National Pension Scheme
The National Pension Scheme or NPS is managed by the Central Government. In this case, your money is distributed in equity and debt markets. You can withdraw 60% on retirement and the rest should be used to buy annuity.
7. Pension Funds
This scheme remains in force for the long term and offers a comparatively better return at the time of maturity. Currently, 6 fund houses are authorized in India that provide pension funds. These plans keep you from relying on banks for loans.
8. Guaranteed Period Annuity Plan
Under these plans, the annuity is provided for specific periods to the policyholders such as 5 years, 10 years, 15 years, and 20 years no matter if the insured survives that duration or not.
Conclusion
It is certain that pension plans come in a variety of options that suit different requirements of people. With a little bit of planning and understanding of different plans, you can plan for a secured life after retirement. There are numerous pension plans in the market that you can choose from to have a safe retirement. So, choose one wisely.
Also Read
Best Life Insurance Retirement Plans 2021
What Are Protected Retirement Plan Annuities?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
