Pension Plan
Pension plan or retirement plan are a type of investment plan, which helps you to accumulate a part of your savings over a long-term period so that you can have a secured financial future. Pension Plan helps you to deal with the uncertainties post-retirement and ensures a steady flow of income after retirement.
In a retirement plan, the insured needs to contribute a specific amount on a regular basis until the time of retirement. The accumulated amount is given back to the insured as pension or annuity at regular intervals of time. The pension plans not only secures the financial future of the individual af-ter retirement but also help an individual to deal with the eventualities post-retirement. When you continuously invest in a pension plan, the amount multiplies due to the benefit of the power of compounding, which makes a lot of difference to your final savings corpus.
Types of Pension Plans
National Pension Scheme (NPS)
New Pension Scheme was introduced by the government of India in order to secure the financial future of the individual after retirement. The policy-holder can put savings in the New Pension Scheme. As per the preference of an individual, the money invested in the National Pension Scheme is put in equity and debt funds in order to generate returns on investment. The policyholder can withdraw 60% of the amount at retirement and rest 40% of the amount is used to purchase the annuity. The maturity proceeds are not tax-free.
Immediate Annuity
Under an immediate annuity scheme, the pension is provided immediately. The policyholder has to pay a lump-sum amount and pension will be pro-vided instantly, based on the lump-sum amount paid by the policyholder. Under the immediate annuity pension scheme, the insured can choose from the range of annuity options. Moreover, the premiums paid are tax-exempted as per Income Tax Act, 1961. In an immediate annuity retire-ment plan, the nominee of the policy is entitled to receive the money in case of demise of the insured person during the tenure of the policy.
Annuity Certain
Under this pension plan option, the annuity is paid to the annuitant for a specific number of years. The annuitant can choose the period and if they pass away before receiving all complete payment, the annuity will be paid to the beneficiary of the policy.
Guaranteed Period Annuity
Under guaranteed period annuity plan, the annuity is provided to the poli-cyholder for certain periods like 5years, 10years, 15 years or 20 years, whether or not the insured survives that duration..
Life Annuity
Under the life annuity plan, the pension amount will be paid to the annui-tant until death. After choosing the option of ‘with spouse’, the amount of pension will be given to the spouse of the policyholder, in case of the death of the policyholder.
National Pension Scheme (NPS)
New Pension Scheme was introduced by the government of India in order to secure the financial future of the individual after retirement. The policy-holder can put savings in the New Pension Scheme. As per the preference of an individual, the money invested in the National Pension Scheme is put in equity and debt funds in order to generate returns on investment. The policyholder can withdraw 60% of the amount at retirement and rest 40% of the amount is used to purchase the annuity. The maturity proceeds are not tax-free.
Deferred Annuity
A deferred Pension Scheme allows you to accumulate a corpus through regular premium or single premium payment over a policy term. After the completion of the policy tenure, the pension is provided to the insured. The deferred pension scheme offers various different benefits to the insured person. Moreover, it also offers the benefit of a tax exemption that is asso-ciated with the pension scheme.
In a deferred pension plan, only 1/3rd of the corpus is tax-free on with-drawal, whereas the 2/3rd of the corpus is taxable. The amount invested in a deferred pension plan is locked and cannot be withdrawn for any emer-gency. A deferred pension scheme can be bought by paying one-time payment as well as paying regular premium payments. Therefore, these pension schemes are suitable for all types of investors, be it those who want to invest systematically and those who have a chunk of money to in-vest at one go.