Retirement planning is an important financial activity so that you can live a financially independent retired life and fulfil your bucket list. As your income usually dwindles after you retire, you need to create a retirement corpus over your working life so that your retirement can be easily funded. Moreover, you should ensure that the retirement corpus that you accumulate, gives you regular incomes after retirement.
This is where life insurance pension plans come into the picture.
What are pension policies?
Pension policies are retirement oriented life insurance plans. These plans come in two main variants. While one variant allows you to accumulate a retirement corpus through regular savings, the other offers lifelong incomes that are guaranteed in nature.
So, life insurance pension plans help you plan for your retirement in the best possible manner.
Types of pension plans
As mentioned earlier, pension plans come in two variants. So, here are the types of pension plans available in the market –
Deferred annuity plans give you the time to create a retirement fund. You can choose the tenure of the policy and invest over the tenure to create a corpus. Then, when the plan matures, you can use the corpus for funding your retirement.
Immediate annuity plans are those that pay guaranteed pensions immediately after you buy the policy.
Features and benefits of pension plans
Some unique features of pension plans include the following:
Importance of life insurance pension policies
Here’s how life insurance pension policies can help you plan your retirement –
So, you should invest in the best pension plan in India to plan an ideal retirement corpus for your golden years.
Companies offering best pension plans in India
There are more than twenty life insurance companies offering pension policies in India. Here’s a pick of the best companies –
Being awarded ‘The Best Life Insurance Company in BFSI Awards 2018,’ HDFC Life is one of the leading life insurance providers in India.
Pension plans offered by HDFC Life are as follows:
Why choose HDFC Life pension plans?
Bajaj Allianz Life is amongst the ‘Top 75 most valuable Indian brands 2020,’ with Assets under Management of INR 73, 773 crores and a Claim Settlement Ratio of 98.48% for the financial year 2020-21. The solvency ratio of the insurance company is 666% as of 31st March 2021.
Pension plans offered by Bajaj Allianz Life are as follows:
Why choose Bajaj Allianz Life pension plans?
ICICI Prudential Life is India’s first insurance company which was listed on the stock exchange. The company is engaged in life insurance and asset management.
Pension plans offered by ICICI Prudential Life are as follows:
Why choose ICICI Prudential pension plans?
Owned by the Ministry of Finance, Government of India, LIC is one of the oldest life insurance companies in India.
Pension plans offered by LIC are as follows –
Why choose LIC pension plans?
Claim Settlement Ratios of popular insurers
The Claim Settlement Ratio (CSR) is the percentage of claims that the insurer has settled against the total number of claims that were made in a financial year. All the above-mentioned life insurance providers have the best CSRs in the industry. Have a look at the CSR of the popular insurers for the financial year 2019-20–
Name of the insurance company
Claim Settlement Ratio
Bajaj Allianz Life
ICICI Prudential Life
Factors to consider when buying pension policies
You can buy a pension plan easily, online or offline. However, before buying the policy, here are some factors that you should consider –
To build up a sufficient retirement corpus, you should start saving as early as possible. Buy a deferred pension plan at an early age and choose a long term period. This would give you time to accumulate a considerable retirement corpus.
Vesting is when a deferred pension policy matures. After vesting, you can choose to receive pension income from the policy. Alternatively, you can also invest in a single premium deferred annuity plan to defer the vesting by a few years. Choose to receive the annuity payments after retirement, i.e. when your income stops. This would help you earn regular incomes from your pension plan after you leave work.
If you are investing in an immediate annuity plan, choose the joint-life benefit if your spouse is alive. This would ensure that the annuity payments continue if either of you is alive. This would give financial security to your spouse in your absence.
Deferred annuity plans come as endowment plans, as well as a unit, linked plans. If you are risk-averse, invest in an endowment plan. However, if you don’t find investment risks, ULIPs are better as they can offer attractive returns.
How to choose the best pension plan?
As you have seen above, there are multiple insurance companies offering one or more pension policies for your retirement needs. To choose the best pension plan in India, here are some tips that you can use –
Always compare the available pension policies before you pick one. Comparing helps you find the best retirement plan that offers inclusive coverage and has the best potential of creating a sufficient corpus for your golden years.
To compare, you can visit Turtlemint and have a look at the plans available. Turtlemint is tied up with leading insurance companies that offer the best pension plan in India. So, at Turtlemint’s platform, you can find some of the best retirement plans, compare between them, and then choose the right policy that meets your retirement planning needs.
In the case of immediate annuity policies, the best pension plan would be the one that offers the best annuity rates on your corpus. So, compare the annuity rates under different immediate annuity plans and then choose a policy that offers the highest annuity pay-out.
Traditional deferred pension policies might offer bonus additions. There might be guaranteed or loyalty additions as well that would help you accumulate a considerable corpus. So, if you are choosing traditional deferred annuity plans, look at the returns promised. Choose a plan that offers the maximum additions to the corpus so that your retirement fund is enhanced.
In the case of ULIPs, however, check the returns offered by the different funds under the plan. Compare the returns over the past years to find funds that have been yielding consistently high returns. Plans that offer such funds would, thus, be the best retirement plans.
Lastly, you should also check the reputation, market worth and the Claim Settlement Ratio (CSR) of the insurance company from whom you are buying the pension plan. The insurer should be a market leader with a high CSR so that you can trust the company with your retirement plan.
Check out the best pension plans in India and then invest in one so that you can have a worry-free retired life.
Annuities are paid throughout your life. Under most plans, annuities are paid up to 99 or 100 years of age.
When your deferred annuity plan matures, you can commute up to 60% of the accumulated corpus. However, the entire amount of commuted pension is not tax-free. Tax exemption is allowed only on 1/3rd of the accumulated corpus, i.e. 33.33%. The remaining 27.67% would be taxable.
Annuities are taxed as your income. They would be added to your taxable income and taxed at your tax slab.
If you opt for endowment oriented deferred annuity plans, the death benefit would be guaranteed. However, under unit-linked plans, the death benefit is the higher of the sum assured or the fund value.