8 Types of Retirement Plans | What Are the Different Retirement Plans

December 20, 2021
By Life & General

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To appreciate the advantages of retirement planning, we must first understand what retirement planning entails. What exactly is it a part of?

Retirement planning should be part of your financial strategy. As the average life expectancy rises, so does the need for retirement preparation. Retirement planning not only offers an additional source of income, but also assists in managing medical emergencies, fulfilling life objectives, and being financially self-sufficient. Individuals might employ planning services to assist them in making retirement plans.

Related Blog: 15 Benefits of Retirement Planning

What Is A Retirement Savings Plan or Pension Plans?

A pension plan, often known as a retirement plan, is meant to meet your financial needs and obligations once you retire, such as medical crises, home bills, and other living expenses. To protect your senior years, you must invest in the greatest retirement plans available.

8 Types of Retirement Plans or Pension Plans in India

There are several pension plans available in India when it comes to picking the finest pension plan. Here is a handful of them, with detailed explanations to assist you in making an informed decision:

Here are different types of retirement plans in India:

1. Deferred Annuity

The policyholder can build up a corpus by paying single or daily premiums in a delayed annuity pension plan. As a result, they will save a large amount of money as a pension during the scheme’s duration. Furthermore, you might benefit from various tax advantages by using this type of pension plan.

Benefits:

Tax-deferred gains
Unlimited contributions
Range of benefits
The time as power

2. Immediate Annuity

It’s a type of annuity that pays out immediately. You make a one-time payment and instantly begin earning annuities as a pension. You can choose from a variety of annuity plans and the sum you want to invest.

Benefits:

Start receiving money right away
Simplicity
Potential for lifetime income
Protection against market losses
Customizable

3. Annuity Certain

When it comes to the finest pension plan in India, the policyholder will get an annuity for a certain number of years. They have the option of choosing the payment period that is most suitable for them. Contributions are made to the pension plan’s nominee in the case of the insured’s death.

4. With Cover Pension Plan

Such pension programmes involve both life insurance and investing. It guarantees that the policyholder’s family will receive a lump-sum payment if the policyholder dies. However, keep in mind that the insurance payout total of this type of pension plan may be less than that of a standalone insurance plan.

Benefits

Regular Income Post Retirement
No-Risk Investment
Insurance Cover
Option to Add Riders
Tax Benefits

5. Life Annuity

As the name indicates, this type of pension plan stays operative until the policyholder passes away. If their insurance includes a “with spouse” option, their spouse will be eligible for a pension payout if the insured dies.

6. Guaranteed Period Annuity Plan

The annuity is paid for a set amount of time and then until the annuitant dies. You will receive a greater pension if the guarantee term is shorter. When the annuitant dies, the annuity comes to an end.

7. National Pension Scheme (NPS)

The Indian government offers a range of pension plans for retirees, including the National Pension Scheme. As an employee, you may contribute to this pension plan and save at regular intervals in the pension account, which will be paid out when you retire.

Benefits:

Returns/Interest
Tax efficiency
Risk Assessment

8. Pension Funds

Pension funds are financial instruments that assist you in saving money for your post-retirement years. By contributing a certain amount to your pension fund every month, you will gradually accumulate a sizable sum.

Benefits:

Guaranteed Pension/Income
Tax-Efficiency
Liquidity
Vesting Age
Accumulation Duration
Payment Period
Surrender value

Who Should Opt For Pension Plans?

To have a financially secure retirement, everyone should invest in pension plans. Several retirement programmes are covered by Section 80C of the Income Tax Act of 1961, and taxpayers are eligible for tax deductions of up to Rs.1.5 lakh. Any strategy you select must be in line with your investment objectives (or retirement plans). If you want to retire early, for example, your corpus should be sufficient to support you during your retirement years. As a result, the key is to pick the right retirement plan.

How To Choose The Best Type Of Pension Plan?

Every individual owes himself and his loved ones a vital financial duty in the form of retirement planning. Those who ignore it will have a lot to regret when the bank’s money supply runs out. With the increase in life expectancy and escalating cost of living and healthcare, retirement planning must be taken up on priority.

Earlier the better
Think diversification
PPF are not enough
Understand the importance of vesting age
High sums assured
A suitable annuity option
Assured death benefit
Manage expenses better
An important financial planner
Equities are important

List of Best Pension Plans in India in 2022

If you’re seeking a pension plan that will help you meet your financial obligations once you’ve retired, go to our website to see the top 5 pension plans in India and decide which one is right for you.

1. LIC Jeevan Akshay 6 Plan:

The LIC Jeevan Akshay 6 policy plan is an immediate annuity plan, which can be bought by paying a lump sum amount as a single premium. The pension starts immediately after buying the plan.

Features and benefits:

Premium paid in a lump sum
Pension/annuity payment can be received either monthly, quarterly, half-yearly or yearly
No medical examination is required to avail of this plan
Minimum purchase price of Rs 1 lakh for offline distribution channels and Rs 1.50 lakh for online distribution channels
No maximum limits for the purchase price, annuity etc
The minimum entry age is 30 years and the maximum entry age is 85 years
Age proof is mandatory
Premium paid is exempt from tax

2. LIC Jeevan Nidhi Plan:

The LIC Jeevan Nidhi Plan is a with-profit pension plan. The accumulated amount of the LIC Jeevan Nidhi plan is used to generate a pension for the policyholder based on his or her survival past the policy term.

Features and benefits:

Premiums paid are exempt under Section 80CCC of the Income Tax Act
For the first five years, the policyholder will receive guaranteed additions @ Rs.50/- per thousand Sum Assured for each completed year
The policy will participate in profits of the corporation from the sixth year onwards based on terms determined by the Corporation
Minimum basic Sum Assured is Rs 1 lakh under regular premium and Rs 1.50 lakhs under single premium policies
No maximum limit for basic Sum Assured
Policy term ranges from 5 – 35 years
Minimum vesting age of 55 years and maximum of 65 years

3. SBI Life Saral Pension plan:

The SBI Life Saral Pension plan is an individual, participating, non-linked, traditional pension plan, which offers the policyholder protection from market fluctuation and volatility.

Features and benefits:

Guaranteed bonuses for the first 5 years, @ 2.50% of the sum assured for the initial three years and 2.75% of the sum assured for the following two years
The policyholder is assured of vesting bonuses on the maturity of the plan
The minimum policy term is 10 years and the maximum term is 40 years
The minimum annualized premium amount starts at the payment of Rs 7,500 per annum with no maximum limit
The minimum entry age is 18 years and the maximum is 65 years
Minimum maturity age of 40 years and maximum of 70 years
Minimum Sum Assured of Rs 1 lakh with no maximum limit
You can opt for single, monthly, yearly and half-yearly premium modes
You can enjoy life cover through SBI Life – Preferred Term Rider

4. HDFC Life – Click2Retire:

The HDFC Life – Click 2 Retire plan is an online Unit Linked Plan that offers the policyholder market-linked returns with minimal charges, which helps in meeting post-retirement requirements.

Features and benefits:

Guaranteed vesting benefits as well as additional gains from the market
Minimum entry age of 18 years and maximum of 65 years
Low maturity age of 45 years and maximum of 75 years
Death benefits to the nominee will be higher than the fund value of the policy or 105% of premiums paid till then
Tax benefits under Section 80C and Section 10(10A) of Income Tax Act 1961

5. HDFC Life – Assured Pension Plan:

The HDFC Life – Assured Pension Plan is a Unit Linked Pension Plan that offers market-linked returns with loyalty additions to the policyholder to meet retirement goals.

Features and benefits:

Guaranteed vesting benefits as well as additional gains from the market
Loyalty additions every alternate year from the 11th year onwards
Minimum entry age of 18 years and low vesting/maturity age of 45 years
Limited and single pay options
Death benefits to the nominee will be higher than the fund value of the policy or 105% of premiums paid till then
Tax benefits under Section 80C and Section 10(10D) of Income Tax Act 1961

Conclusion

Savings run out quickly and are frequently utilised in crises, so it’s critical to pick the best pension plan to ensure that you have enough cash flow to cover your basic daily demands after retirement. When you invest in a pension plan regularly, the amount you contribute grows owing to the force of compounding, which makes a significant difference in your eventual savings corpus. By choosing the right retirement plan, you can plan for retirement in a phased manner.