Pension plans, also known as retirement plans helps an individual to secure his/her future. It is a process in which an individual transfers some of his income towards retirement benefits. It helps an individual to safeguard his/her post-retirement life and also let an individual live financially independently.
IMPORTANCE: Pension plans helps an individual to get a fixed and a regular income after getting retired. The amount of pension depends on the amount invested i.e more the amount, more is the pension. Also, they are liable to get tax benefits under section 80C to the extent of ₹1,00,000. Section 80C, 80CCC and 80CCD are the various sections which allow exemption under the Income Tax Act, 1961. There are also companies which allow you to withdraw the funds in case of an emergency or shortage. When a person retires, he/she will face a decrease in income, but in that case, pension plans help to be a regular source of income. This will help to maintain same lifestyle and cope up with other expenses too.
ELIGIBILITY CRITERIA FOR PENSION PLANS: The eligibility criteria for investing in the pension plans depends and differs company by company. Some of the insurance companies offer various pension plans to individuals who had attained 18 years of age, whereas some companies require that an individual must be 30 years of age. Also, there are various companies which offer these plans to people who had attained 70 years of age. One will start receiving a pension when he/she attains minimum 40 years of age, or as per the pension plan he/she had invested in.
POLICY PERIOD: You can select the time when you want to start getting a pension. Some pension plans keep the vesting age as minimum 40-50 years. Also, it is flexible up to 70 years of age. A few pension companies also allow it to be at 90 years of age. If you start investing in pension plans at the age of 25 and continue it for more 25 years, then the accumulation period will be around 25 years. Some of the companies also allow partial or full withdrawals during accumulation periods.
PLAN SELECTION: Before investing in pension plans, one must keep a few points in mind. First of all, check about the reviews and ratings of the insurance company. Compare various policies and schemes and select the one which is the most beneficial. Most importantly, check if in the case of death of the insurer, whether the amount can be handed over to the nominee or not. There are traditional pension plans available which invest some of the amount of premium in government securities and bonds, thus resulting in lower returns. So, you can go for investing in ULIP policies which yield higher returns. ULIP investing also charges some amount in the form of fund management, allocation charges, etc, so do check about these before investing.
GOVERNMENT PENSION SCHEMES: The government pension schemes are as follows:
HOW TO BUY PENSION PLANS: In order to buy pension plans, various documents are required to be submitted. They are as follows:
Is it really important to have pension plan?
Investing in the pension plan is one of the smarter step you can ever take. It will give you a confirmation that your savings are enough to sustain your life with the same standard you had always maintain. Besides all this, it also gives you the several benefits as