Best Pension Plans in India: Why Should You Purchase Them?
Best Pension Plans in India: An Overview
While living in the present and enjoying it to the fullest is important, it is equally important to plan for the future and save for it. We do not know what lies ahead. The Covid-19 pandemic has given us all a big life lesson on how anything can happen at any time and how we should stay insured. It is important to have a health and life policy, along with investing money for the future and also saving money in the form of a pension/retirement plan for a steady source of money post-retirement. This article will tell you everything you need to know about pension plans: what is it, why one should invest in them, the benefits of investing in them, and also the best pension plans in India available to the people.
What is a Pension Plan?
A pension plan, also known as a retirement plan, is a kind of life/annuity plan that is specifically designed for a person’s post-retirement needs. It makes sure that a person can access all necessities after he retires, even though he does not have an active source of income. To achieve this, one needs to plan and stay prepared to fulfill all his needs and goals. Here is when pension plans come into the picture. They help you accumulate a part of your income, over a long period, so that this money can be used post-retirement.
Pension plans play a crucial role in one’s life. They provide a steady source of income when one needs the most. It helps you in unavoidable and unexpected situations and is your best friend when you retire. It is important to have a piece of proper knowledge of them before investing so that you earn maximum returns.
A pension plan is a lifelong income, which means that if invested in a pension plan, you will receive regular payments from your investments right after your retirement. The age at which you decide to start receiving your pension payments is called vestige age, and you can choose to start getting income at that age, or a later date of your choice.
The period of age in which you invest the money is called the accumulation period, and the period in which you receive the pension after retirement is called the payment period.
There are various types of pension plans in India, such as Deferred Annuity, Immediate Annuity, Annuity Certain, Guaranteed Period Annuity, and National Pension Scheme, amongst others.
Why is a Pension Plan Important?
There are several reasons why you should invest in a Pension Plan. The following are a few of them:
- Financial Independence: After retirement, one does not have an active source of income. And here, pension plans play a vital role. They provide money post-retirement, like a regular source of income, and this way, you do not have to rely on anyone else for your expenses and necessities. You will be self-sufficient and finally independent. This will also make you feel confident and happy.
- Medical expenses: With an increase in age, the chances of unforeseen medical expenses also increase. For such emergencies, one should be insured with savings. Pension funds will help you get proper medical treatment.
- Increase in Retirement Years: The life expectancy of Indians is increasing, and so is the number of retirement years. One needs to have sufficient funds to pay for his necessities and live the same lifestyle throughout.
- Power of compounding: The sooner you start investing in the scheme, the higher will be your returns. Hence, it is suggested to start investing in the best pension scheme as soon as possible.
- Increasing Inflation: Inflation is increasing at a rapid pace. And it means that the expenses will increase too. Hence, your regular income will not be enough to maintain the same lifestyle if it remains constant and inflation increases. Hence, it is important to plan for the future and save sufficient funds to stay insured.
Benefits of a Pension Plan
There are various Benefits of investing in the best retirement plan in India. A few of them are as follows:
- Earn regular income after you retire: Pension funds offer a guaranteed amount of money regularly after one retires. This acts as a regular source of income and you can continue to live the same lifestyle without an active source of income.
- Insurance Cover: Most pension plans also include insurance cover for you and your family, for any unforeseen events in the future. This will make sure that you do not face a lot of trouble and stay insured when you face those times of difficulties.
- Tax Benefits: One can claim tax deductions on contributions up to Rs.1,50,000 made towards a retirement plan. The same can be claimed under section 80C of the Income Tax Act.
- No-risk investment: Pension plans are considered no-risk investments as they provide unconditional protection to the insured.
- Different plans available to choose from: There are various types of plans that cater to different individuals. Each person is different and has different goals and purposes. There is a type of pension plan for each kind.
- Option to add rider: You have the option to enhance your protection by opting for an add-on rider, such as disability due to accident rider, or critical illness rider.
- Pension plans are a very important form of investment that secures the future of an individual.
- Pension plans provide a regular source of income after you retire.
- There are various types of plans that cater to different individuals. Each person is different and has different goals and purposes. There is a type of pension plan for each kind.
Best Pension Plans in India 2022
There are several Pension Plans available to the people. And all of them claim theirs as the best pension policy. Although, not all are the best pension schemes in India.
The following are the most famous and can be considered the best retirement plan in India 2022:
- HDFC Life Click 2 Retire: This pension is a market-linked plan offered by HDFC Life. It has an entry age of 18 to 65 years, a maturity age of 45 to 75 years, and a policy term of 10 to 35 years.
- Max Life Guaranteed Lifetime Income Plan: This plan is offered by Max Life and it offers immediate annuity and deferred annuity. One can enter the immediate annuity plan at any time till 80 years and can enter a deferred annuity plan from 30 to 80 years. The plan offers a maturity age of 31 to 90 years.
- SBI Life Saral Retirement Saver: This plan offered by SBI Life is a Traditional Savings plan. This plan can be entered between the ages of 18 to 65 years. They can be matured between 40 to 70 years of age. And has a policy term of 5 to 40 years.
- LIC New Jeevan Shanti Plan: This plan is offered by LIC and is a Non-linked, Deferred Annuity plan. This plan can be entered between the ages of 30 to 79 years. It can mature between 31 to 80 years of age.
- Bajaj Allianz Lifelong Goal Scheme: This plan is offered by Bajaj Allianz and is a Market-linked plan. This can be entered anytime between the ages of 18 to 65 years and can be matured at 99 years of age. The policy term is for 10 to 25 years.
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There are a number of pension plans offered by various companies. A few of the best pension schemes above-mentioned schemes will not suit all. Only you can find out the best pension scheme for yourself. You need to consider a few factors before selecting the plan. The factors are as follows:
- Type of Pension plan
- Returns from the plan
- Guaranteed pension
- Bonus and other benefits like cover medical emergencies
- Maturity age
One should choose the pension plan after conducting proper research and finding out the best pension plan as per one’s needs after considering the above-mentioned factors.
Keep in mind that the sooner you start investing in pension plans, the higher returns you will earn. It is the effect of compounding which will help you earn higher returns. Make sure that you meet the requirements and then as per your convenience, invest in the best possible retirement plan possible. By starting to invest early, you can invest smaller amounts and earn higher returns in the future. Be smart and invest wisely. Start investing now.
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Are there any eligibility criteria for pension plans?
Yes, you should check the minimum and maximum entry age, annual premium amount, minimum and maximum vestige age, premium payment term, and the policy term before investing in a plan. All pension plans have different features and make sure that the criteria are met.
What documents are required to buy a pension plan?
Each pension plan is different and requires different documents. Although the majority of them would need age proof, identity proof, address proof, income proof, and medical reports of the insured.
Can I invest in multiple pension plans?
Yes, you can invest in more than one pension plan. There is no restriction on the number of retirement plans that you can invest in.
Can I change the nominee of the retirement policy?
Yes, you can change the nominee at any time during your life.