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What is a Pension Plan?
A Pension Plan helps you save for your post-retirement life. You invest regularly during your earning years to build a corpus which you can then use to fund your retirement life when there will be no steady source of income. These savings plans generate a steady return over a long period of time based on the amount you choose to invest every year. It is important to invest regularly so that you can sufficiently live your retirement life comfortably.
Best Pension Plans in India 2023
Types of Pension Plans in India
Pension plans can be broadly classified into 2 categories.
Deferred Annuity Plans
Such pension plans are long term savings & investment plans. You invest regularly during your lifetime to save for your retirement goals. On retirement you can use this accumulated amount to purchase an Immediate Annuity Plan which will give you a regular income for the rest of your life. Deferred Annuity Plans can be market linked (ULIPs), Guaranteed Returns or Participating Plans.
Immediate Annuity Plans
In such plans, you invest a lumpsum amount and the plan will give you a regular income till you are alive. There are multiple types of Annuity Plans which can be customised to given income till both your and your spouse are alive and some in which the principal amount invested by you will be returned on policyholder's death.
Benefits of Pension Plans
- Helps build a retirement corpus
- Drives a Systematic Investment Behaviour
- Offers steady and predictable income post retirement
- Tax Benefits
- Offers customised retirement income
What is Retirement Planning?
You have to save for your retirement days. There are multiple ways to do this while you are earning.
- Save a lot of money
- Build assets which will start giving regular income
- Invest in multiple asset classes which can be redeemed on retirement
All of these involve using your earning years to gradually build something which can help during your retirement days. It is best to invest in riskier investments while you are younger (for better returns) and then gradually move them to more stable-returns investments as you grow older. This should be a goal-based activity which you should conduct when you have a strong source of income.
Importance of Retirement Plan
Retirement planning is often the most neglected part of today's consumption based economy. One should realise that with improvement in medical facilities, there is a risk of living too long. You will have to build a retirement income for yourself which comes without any business or salary related income. And since this could be for a period of 20-25 years, it is very important to start saving for your retirement early in your life.
Eligibility for Retirement Plans in India
Anyone over the age of 18 years can start investing in Pension Plans in India. There is no upper limit on the amount you can invest every month or year.