Rahul
was looking to buy a pension plan for himself. He was 42 years old and
understood the importance of starting a retirement corpus early on. He did not
want to wait till he was too close to his retirement as he knew that would make
it difficult for him to build up a substantial fund. So he went shopping for a
pension plan. To his surprise though, there were many factors that Rahul found
he did not know about the pension plans. It took him a while to do his research
and he bought a suitable plan only when he was sure about the clauses of a pension
plan.
If
you too need some help with the understanding of the pension plans, take a look
at this article where we tell you about the main features of the pension plans
in India.
Features of pension plans:
Things to remember:
Take
a look at these important features of a pension policies so that you know what
kind of plan you must opt for and why.
· Types of annuity: Pension plans
offer two kinds of annuity options to choose from. You can have a deferred annuity or an immediate
annuity. In a deferred annuity pension plan, you invest small sums of money
over a long period of time. The money you put in is saved din a fund and after
your retirement, regular payments are made out of this fund. This helps you to
have a regular source of income. Deferred annuity plans are very popular types
of retirement plans. Immediate annuity
plans are types of retirement plans where you pay a lump sum amount of money
after your retirement (or when you want the plan to kick in) and you start
getting regular payouts immediately after that.This is a good option if you
want to invest your retirement bonus or any other large sum of money you may
receive and utilise it in your retirement years.
·
Taxation: You must be aware
of the taxation norms before you buy a pension plan. The premiums you pay on
your retirement plans are tax exempted under Section 80C of the Indian Income
Tax Act. The income that you earn after the plan matures, however, is fully
taxable. So you must keep this point in mind before you invest in a good
retirement benefit plan.
·
Withdrawal limit
upon maturity: If you invest in a deferred annuity pension plan, then you can withdraw only
1/3rd of the accumulated amount when the policy matures. This is
important to note as many people expect to get back the entire sum along with
the interest component. However, this doesn’t happen in pension policies and
you have to buy an annuity plan with the remaining amount. Regular payouts will
then begin from the annuity plan and you will get a regular source of income
thereafter.
·
ULIPs v/s Endowment
plans: Most of the pension plans available from the insurance companies in India are
either endowment plans or ULIPs. You have to therefore make a choice between
the two before you start the plan. If you have a low risk appetite and do not
want to risk your retirement fund in any way, it is a good idea to invest in a
traditional endowment plan. If however, you want to take a few risks and look
to multiply your returns, you could invest in a ULIP. It is safe to do so as
you get a death benefit and a sum assured. A part of your funds are invested in
the markets and you stand to earn high dividends from them and get more money
for your retirement days.
So
as you can clearly see from the points mentioned above, the pension plans in
India are varied and come with a lot of features. Understand the plans before
you invest. This will help you in getting the most out of your pension policy and you will be assured of a financially strong retirement.
The post retirement days are the golden days of your life and you must be
economically well off to enjoy these days. So rather than depending on anyone
else, take charge right away and pave a golden future for yourself.
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