Best Pension Plans in India – Compare & Buy Top Retirement Plans
You need money at all stages of life. When you are working, you are financially independent and you have various financial responsibilities on your head. After you retire, your financial responsibilities are taken care of but you still need funds to meet your lifestyle expenses. After retirement, you don’t work and don’t have a regular source of income. That is why you need a specific fund which would meet the expenses of your retirement. A retirement fund is, therefore, needed after retirement and you need to plan for the fund when you are working.
Planning for retirement:
Retirement planning should be done starting from an early age. This is because of the following reasons:
- Longer investment horizon
When you are young you have longer investment tenure to invest before you retire. The longer the investment tenure is the higher the corpus that you can accumulate for retirement. Moreover, when the investment tenure is high, you also earn higher compound interest because the interest grows exponentially if the tenure is high. Both these factors of a longer investment period and higher returns ensure you have a good retirement corpus.
- Smaller investment required
When you start from an early age, you can invest smaller amounts to build up a larger corpus. You can set aside small, affordable amounts every month regularly and build up a large corpus over time because your investments would attract compound interest and grow substantially if they are given time.Both these reasons stress on creating a substantial retirement corpus which would be sufficient to cover your expenses for two or three decades down the line. A substantial retirement corpus is needed because after you retire the cost of goods and services would have increased manifold due to the effect of inflation. As such, if your corpus is small it would not be sufficient to cover your expenses fully. So, you should start saving early so that you can create a good corpus through affordable investments.
Top #5 Retirement planning tools
Since retirement planning is important, there are different types of retirement plans in India which help you create a retirement fund. Some of the popular investment avenues include the following –
- Fixed deposits
Fixed deposits are where you invest a lump sum amount for a specific period of time. Your deposit, thereafter, earns a guaranteed rate of return and the deposited amount along with the returns earned is refunded when the deposit matures. Fixed deposits are good for investors who are looking for fixed returns from their investments.
- Mutual funds
Mutual funds are another popular investment option which promises market-linked returns. You can invest small amounts in a chosen fund regularly through Systematic Investment Plans (SIPs) and then earn market-linked returns on your investments. There are different types of funds to choose from but you should know that mutual funds are exposed to market risks and returns are not guaranteed.
- Real estate
Many investors also consider real estate investments for their retirement. They invest in a plot of land or property and then sell the property to get gains. Real estate investments, however, involve huge sums of money and are not suitable for small investors.
- Public Provident Fund
Public Provident Fund (PPF) is a fixed interest investment avenue wherein you can make investments regularly or in a lump sum. PPF gives you guaranteed returns which are also tax-free in nature and you can also choose a long investment period to grow your retirement corpus substantially.
- Life insurance pension plans
Life insurance pension plans are specifically designed retirement oriented life insurance plans which help you create a retirement corpus. Pension plans promise you the payment of annuities after you retire. These annuities are a series of payment which gives you a regular income for your lifetime.Among the above-mentioned retirement planning tools, pension plans offered by life insurance companies are the best and the most suited tool for your retirement. Do you know why? Let’s understand the concept of these plans and why they are ideal for retirement planning –
What are pension plans in India?
Pension plans are a type of life insurance plans where the insurance company promises to pay a lifelong income to you through annuities. Under pension plans, you can invest in building a retirement corpus. Thereafter, when you retire, the plan promises the payment of annuities throughout your life.
Types of pension plans in India
Retirement plans in India come in two variants – deferred annuity and immediate annuity. Let’s understand these variants in details –
- Deferred annuity plans
Deferred annuity plans are those wherein you can choose the investment tenure to create a retirement fund and annuities are paid after the investment tenure is over. Under deferred annuity plans, you buy a plan with a chosen term. During the term, you can pay premiums which are accumulated to create a retirement corpus. Thereafter, when the plan tenure is over, you can use the accumulated corpus to receive annuities. Moreover, in case of death during the plan tenure, deferred annuity plans also promise a death benefit. Thus, deferred annuity plans provide insurance coverage as well as the promise of annuity payments for your life.
Features of deferred annuity plans
Deferred pension plans in India have the following salient features –
- The plan can be offered as a traditional insurance plan with guaranteed returns or as unit-linked insurance plans with market-linked returns
- When the plan matures, you can withdraw 1/3rd of the corpus in cash. This withdrawal is called commutation of pension and it is tax-free. From the remaining corpus, you would have to receive annuity payments. The remaining corpus is utilised to buy an immediate annuity from the company to provide annuity to the annuitant.
- In traditional deferred annuity plans, you can earn bonuses
- Premiums can be paid in one lump sum, for a limited period or over the entire duration of the plan
- Under deferred plans, there is an accumulation phase, deferment phase and a pension phase. The accumulation phase is when you pay premiums to create a corpus. Deferment phase is when the corpus grows. Pension phase is when you receive pension payments from the accumulated and grown corpus.
- Immediate Annuity Plans
Immediate annuity plans are those which promise you immediate annuity payments without any waiting period. The age of entry for Annuity Plan depends from company to company so that pension can start immediately waiting. –
The annuity payments are promised for as long as you live and depending on the annuity option chosen, the purchase price –
Features of immediate annuity plans
- You can choose the annuity payment frequency. It can be annually, half-yearly, quarterly or monthly
- There are different types of annuity payment options and you have to select one option as per your requirement. Common examples of options include increasing annuity, the annuity payable for a joint-life annuity payable for life and return of purchase price, etc.
- Immediate annuity plans are traditional life insurance plans which promise a guaranteed rate of annuity
- Premiums are payable only one as a single premium. This premium is also called the purchase price
Benefits of pension plans in India
Pension plans are said to be the best retirement planning tools because of the following benefits which these plans give –
- Pension plans in India promise a lifelong income. This income ensures that your retired life is led comfortably without any financial hiccups
- Immediate annuity plans allow you to receive annuities on a joint life basis. This means that you can add your spouse as the secondary annuitant and in case of your death, the annuity payments won’t stop. They would continue for as long as your spouse is alive. This feature allows you to ensure a source of income for your spouse too in your absence thus giving them financial security in their old age
- Premiums paid for pension plans in India are allowed as a tax deduction under Section 80CCC of the Income Tax Act. Thus, by investing in pension plans, you can also lower your tax liability while building your retirement corpus
- The commuted pension that you receive is tax-free and allows you to meet any financial responsibilities that you might have
- These pension plans in India create a certain amount of corpus solely for your retirement and allows the corpus from being used on other financial needs
- You can create a substantial retirement corpus through unit-linked deferred annuity plans which promise you market-linked returns on your investments
Given these benefits, there is no doubt that pension plans in India are the best way to create a retirement fund for your golden years.
Top #4 pension plans in India
If you are looking to invest in a life insurance pension plan, here are some of the best pension plans in India which you can choose from –
- LIC’s Jeevan Shanti Plan
When it comes to best pension plans in India, LIC has some of the best options to offer and its Jeevan Shanti policy is a very popular plan. Here are the salient features of the plan –
- The plan can be taken as an immediate annuity plan or a deferred annuity plan
- Premiums are payable only once
- You get a choice of nine types of annuity payment options to choose from
- If you opt for a deferred annuity plan, you also get guaranteed additions during the deferment phase to build up your corpus
- The loan is allowed under the policyEligibility parameters
||30 to 85 years
||1 to 20 years
||Minimum- INR 1.5 lakhs
Maximum – no limit
||Minimum – INR 12,000/year
Maximum – depends on the premium paid
- LIC’s New Jeevan Nidhi Plan
Another plan offered by LIC, Jeevan Nidhi Plan is a traditional deferred annuity plan which has the following salient features –
- The plan promises bonuses as well as guaranteed additions during the policy tenure
- LIC’s Accidental Death and Disability Benefit Rider is available as an optional coverage benefit which you can choose at an additional premium
- Premiums can be paid at once or regularly throughout the policy tenure
- You get premium discounts for choosing a high sum assured and also for paying the premiums annually or half-yearly
||20 to 60 years
||5 to 35 years
||Minimum – INR 1 lakh
Maximum – no limit
||Depends on the sum assured chosen
- ICICI Pru Immediate Annuity Plan
This is an immediate annuity plan offered by one of the leading life insurance companies in India. The salient features of the plan are as follows –
- You get a choice of 12 annuity options under the plan
- Premium is payable only once to buy the plan
- You can get higher rates of annuities if the purchase price is high
- If you are a National Pension Scheme investor, you get a discount of 0.5%
||30 to 100 years
||Depends on the annuity that you want
||Minimum – INR 12,000/year
Maximum – depends on the premium paid
- HDFC Life Click 2 Retire Plan
HDFC Life’s Click 2 Retire is a unit-linked deferred pension plan which has the following salient features –
- The plan has minimal charges which ensure that you can get maximum growth for your fund value
- The vesting benefit is guaranteed even if the market is volatile
- Premiums can be paid at once or for a limited period
||18 to 65 years
||10 to 35 years
||Minimum- INR 24,000
Maximum – no limit
||Depends on the premium and fund value
Buying pension plans in India – what you should know?
Before you invest in a pension plan for your retirement needs, there are some factors which you should keep in mind. These factors include the following –
- Type of plan
Choose the type of plan based on the need of receiving annuities. If retirement is a long way off and you have started investing early, choose a deferred annuity plan to build up a retirement corpus. If, on the other hand, you are retired and want to invest your corpus for regular incomes, immediate annuity plans are ideal. So, choose a plan based on your needs.
- Sum assured and premium
In case of deferred annuity plans, choose a sum assured which would be sufficient to cover your family’s financial needs in case of your absence. However, along with the sum assured ensure that the premiums are affordable so that you don’t feel a pocket pinch while saving for retirement.
- Vesting age
Vesting age is the age at which you start receiving annuities. Choose the vesting age wisely. The higher the vesting age is the higher would be the annuity amount. So, choose an age from which you would need annuity income to fund your retirement.
- Annuity amount
The annuity amount depends on the premium that you have paid and the vesting age selected. You can calculate the annuity amount beforehand through annuity calculators. Ensure that the annuity amount is sufficient to cover your retirement expenses.
- Compare before buying
The last factor to keep in mind is comparing the available pension plans in India. There are a lot of plans available in the market and when you compare you can find the best plan. So, go online and compare the pension plans in India to choose the most suitable one.
How to buy pension plans in India?
Buying pension plans in India has been simplified due to the online mode which allows you seamless processes and hassle-free buying. You can buy online pension plans in India through Turtlemint which is an online platform giving you the chance to compare the available plans before buying. You can find both deferred and immediate annuity plans online and then buy them as per your needs. To buy through Turtlemint, you have to follow a simple process which is as follows –
- Visit https://www.turtlemint.com/life-insurance which is Turtlemint’s life insurance home page
- Choose ‘Pension/Retirement’ pension plans in India
- Provide your details which include your gender, date of birth, annual income, smoking habit, expected age of retirement, investment tenure, investment amount and frequency and your contact information
- You can then check the available pension plans in India which offer some of the best features
- Compare the available plans and choose one for your needs
- Fill up an application form for the chosen plan, pay the premiums online and you can buy the policy instantly online through Turtlemint
Easy, isn’t it?
You need a retirement plan in place if you want to lead an independent retired life which is dependent on no one. So, invest in pension plans in India and create a retirement corpus for yourself and your spouse. If you start early you can even leave behind a legacy for your children besides funding your retirement. So, don’t delay. Start retirement planning at the earliest so that you can amass a good corpus by the time you retire.
Frequently Asked Questions:
- Can I buy more than one pension plan?
Yes, you can buy as many pension plans as you like. There is no restriction on the number of plans that you can buy provided you can afford the premium.
- Is annuity income tax free?
No, the annuity income that you receive from pension plans is taxable in your hands. The annuity would be considered as your income and it would be taxed at your income tax slab rates.
- Can I defer the vesting age if I want?
Yes, many deferred annuity plans offer you the option to defer the vesting age and receive annuities from a later date. If you do so, you can get a higher annuity rate by staying invested for a longer period.
- Do immediate annuity plans have any death benefit?
The death benefit under immediate annuity plans depends on the annuity payment option that you choose. Usually, under life annuity option, the annuity payments stop after your death and there is no death benefit. However, if you have chosen the return of the purchase price, the premium that you paid would be refunded back on your death. Moreover, in the case of joint life annuities, in case of your death, the annuity continues if your spouse is alive and stops on the death of the spouse.