Retirement planning can be described as the process to plan the short-term and long-term financial goals and the ways to accomplish these goals. Retirement planning includes identifying different income sources, analysing the financial objectives, estimating future expenses, and opting for a savings programs while managing risks and assets.
Retirement planning is a life-long process. Even though you can start planning for the retirement at any age, it works best when you factor this into your financial planning from the start itself. Retirement planning from an early stage of your career is the best way to secure the golden days of your life.
There are several popular investment options which allow you to accumulate funds along with the tax benefits. While planning for your retirement, it is crucial to consider factors such as future expenses, liabilities, life expectancy along with income and assets. Moreover, the early you start planning for your retirement, a better amount you can accumulate over a period of time.
A pension plan is a type of investment plan which helps you to accumulate a part of your savings over the long term in order to secure your retirement financially. Pension plan helps you deal with the uncertainties after retirement and makes sure that you have a steady flow of income even after retirement. Even if you have a decent amount of savings, a pension plan is still crucial.
A pension plan requires you to make contributions into a pool of funds kept aside for your future financial benefit. This pool of fund is invested in the financial market on your behalf, and the earnings on such investment generate income for your retirement.
There are plenty of pension plans available in India, specially designed for retirement purpose. These plans are usually different from each other in terms of benefits, features, and exclusions. They are basically an investment avenue to generate regular income for your future financial needs. Pension plans are divided into two parts:
The first part is accumulation where you, as the insured, pays the premium as specified in the plan to the insurer.
The second part is the distribution, where you are paid a regular income through an annuity plan post-retirement. Annuity plan is nothing but a type of insurance which pays you an income as per the plan option chosen by you.
Here’s a list of the best pension plans available in India you can consider parking your money and securing your post-retirement days:
| Plan name | Entry age | Policy term | Tax benefits | Annuity payable |
|---|---|---|---|---|
| LIC Jeevan Shanti | 30 to 85 years | - | As per Section 80C of the Income Tax Act. | Depends on the purchase plan and entry age |
| HDFC Life Click 2 Retire | 16 to 65 years | 10, 15 to 35 years | As per Section 80C of the Income Tax Act. | NA |
| SBI Life Saral Pension Plan | 18-65 years | For regular premium: 10 to 40 years, For single premium: 5 years | As per Section 80C of the Income Tax Act. | Basic Sum Assured - Rs. 1 lakh, no upper limit |
| HDFC Life Assured Pension Plan | 18 to 65 years | NA | As per Section 80C of the Income Tax Act. | NA |
The primary benefit of investing in a pension plan is that it provides financial security and stability after retirement. You wouldn’t have to compromise on your standard of living after retiring from your job. Here are some other significant benefits of investing in a pension plan –
Guaranteed income: A pension plan serves the purpose of a reliable and stable source of income after retirement. This helps to plan your retirement in advance and be financially independent even after your retirement. It is advisable to use an online retirement calculator to get a rough estimation of the fund you need to aim for. This will help you choose a pension plan and decide the premium account accordingly.
Liquidity: A pension plan generally comes with low liquidity. However, there are insurance providers that offer pension funds that allow policyholders to withdraw pension at the time of the accumulation stage. This helps the policyholders to be financially prepared for unforeseen emergencies if they arise. More importantly, it prevents you from being dependent on bank loans and borrowing from other sources.
Tax benefits: Pension plan account holders can avail tax benefits as mentioned under Section 80C of the Income Tax Act, 1961. Besides this, there are several other provisions under Chapter VI-A of the Section 80C, Section 80CCD, and Section 80CCC of the Income Tax Act, 1961.
Death benefit: A pension plan does not only come with a regular income after retirement but also offers guaranteed death benefit in case the policyholder dies during the policy term i.e. accumulation period. A death benefit offered by pension plans is usually 105% of the total premiums paid till the death. It also offers benefits from top-ups the policyholder may have opted at the time of purchasing the plan. In case of the unfortunate death of the pension plan account holder, the nominee has three options to choose from: Withdraw the entire amount, utilise the entire death benefit amount to buy an immediate annuity plan, or choose the combination of both.
Being financially independent is the biggest blessing that you can have in the second inning of your life! There are some best pension plans available in India for you to safeguard your post-retirement days financially. Because at the end of the day, a pension plan is all about removing the stress of how you will survive financially after retirement. Those investment instruments which can provide you with an adequate and regular income after retirement age are the best pension plans. At the same time, it is always amusing to see how your savings can enhance your finances today. By taking this into account, you will likely be able to find the best pension plan in the market for you. Happy investing!
