pension plan


A retirement or pension plan is a smart way to accumulate a fixed portion of your savings throughout your working life and build a financially secure future. With no monthly paycheque during the non-working years, the pension could be relied upon for post-retirement expenses. A feature-packed retirement plan will also ensure that retirees are not required to extinguish their savings or withdraw their investments to manage their day-to-day expenses.

But with insurers in India now offering many different types of retirement plans, how will you choose the best? Here are 5 factors that should be considered before choosing a pension plan-

1. Asset Class Options

The premiums paid towards a retirement plan are invested in a fund chosen by the policyholder. Most top insurers offer fund options such as equity, debt, and balanced. The asset class options allow policyholders to choose a fund as per their objectives and risk appetite.

Equity funds come with the highest returns potential but a high level of risk. Debt funds have minimal risk, while balanced funds offer a combination of equity and debt investments with a medium risk profile.

2. Guaranteed Additions and Bonuses

Many of the pension plans also come with guaranteed additions to the basic sum assured. This is generally a certain percentage of the sum assured added to the policy, mostly for the first few years of the purchase.

A few plans, along with guaranteed additions, come with additional bonuses and assured benefits to further boost the returns generated from the retirement plan.

3. Annuity Options

Policyholders are also offered multiple annuity options to ensure that they can select one that best meets their post-retirement goals. Some of the most popular options are lifetime income, lifetime income with cash-back, lifetime income with term guarantee, and last survivor lifetime income.

Ensure that you thoroughly understand how these different annuity options work before making the final decision.

4. Vesting Age

The vesting age is the age at which you’d like to start receiving pensions. It could range between 40 to 70 years between pension plans.

If you’d like to retire early and start receiving regular pensions, you can choose a plan with a minimum vesting age of 40 years. Similarly, if your goal is to retire late, look for a plan with maximum vesting age of 60-70 years.

5. Policy Expenses

Last but not least are the expenses related to purchasing the policy. There are generally a few different types of charges associated with a retirement plan.

Note that the higher these expenses/charges, the lesser amount of money you’d be saving for your retirement. Compare these charges of at least a few popular retirement plans before making the decision.

Selecting the Best Retirement Plan in India

A pension plan deserves a spot in every retirement plan to add financial stability and security in the post-retirement years. Invest in a retirement plan as early in life as possible as this will provide you with the opportunity to remain invested for a longer period and boost the returns potential of your investment.

Consider the five factors discussed in this post as a checklist to compare popular pension plans in India so that you can choose one that best meets your requirements and objectives.

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