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  • Pension/Retirement Plans in India

    Life Insurance
    • Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
    • Claim up to Rs. 1,50,000 deduction under section 80C**
    • Choose between annual and monthly premium payment options

    What is an Annuity/Pension Plan?

    After years and years of hard work, retirement is a phase most of us look forward to in our lives. While retirement is supposed to be the most peaceful phase of our lives, one must also be aware of the fact that one’s regular monthly income comes to a stop during this time. If you have not planned for this during your productive years, you might end up facing various financial difficulties in your life.  

    This is where an annuity or pension plan comes into play. One of the major benefits of a pension plan is that it provides regular income to the policyholder even after his/her retirement. If you are worried about your monthly expenditure following retirement, you must invest in a pension plan and build a corpus large enough to take care of your requirements.

    Pension plans typically come in many forms, and they offer flexible benefits to policyholders depending upon their requirements. Customers can choose between unit-linked retirement plans or endowment plans based on their risk appetite. Most of the insurers in the market have multiple variants of pension plans to reach out to a wide range of customers. Also, customers can choose between single premium pension plans and regular premium pension plans based on their requirements.

    By starting the investment early during the productive years of their life, people can build a large corpus with only a small portion of their annual income. Alternatively, they can also pay a lump sum single premium amount and get regular income from the investment. Most pension plans allow customers to choose the age at which the annuity can begin.

    Best Pension Plans in India 2018:

    There are over 20 life insurers that offer different variants of pension plans in India. These plans come with flexible benefits depending upon the requirements of customers. Based on their specific retirement goals, customers can pick the right plan that caters to their needs. Listed below are some of the top pension plans in India as of 2018:

    Pension Plan About the plan Entry Age Vesting Age Policy Term Annual Premium Amount Sum Assured
    LIC Jeevan Nidhi Plan A deferred annuity plan which provides additional bonus, it offers multiple pension options. Bonus is accrued after the 6th year, with the premium paid eligible for tax exemption under the Income Tax Act. Minimum: 20 years Maximum: 58 years (regular premium), 60 years (single premium) Minimum: 55 years Maximum: 65 years Minimum: 5 years Maximum: 35 years Minimum: Rs.10,000 for single premium, Rs.3,000 for regular premium Minimum: Rs.1 lakh (regular premium), Rs.1.5 lakh (single premium)
    SBI Life Saral Pension Plan A plan which offers guaranteed bonus ranging between 2.50% and 2.75%, it also provides an option for life cover through riders. Minimum: 18 years Maximum: 60 years (regular premium), 65 years (single premium) Minimum: 40 years Maximum: 70 years Minimum: 5 years (single premium), 10 years (regular premium) Maximum: 40 years Minimum: Rs.7,500 Maximum: No upper limit Minimum: Rs.1 lakh Maximum: No upper limit
    HDFC Life – Click2Retire Plan An online pension plan which secures the retirement of an individual through assured vesting benefit. Being a unit linked plan it invests in funds which meet certain growth requirements Minimum: 18 years Maximum: 65 years Minimum: 45 years Maximum: 75 years Minimum: 10 years Maximum: 35 years Minimum: Rs.24,000 Maximum: No upper limit Based on premium
    LIC Jeevan Akshay VI Plan An immediate annuity plan which provides pension immediately after paying the single premium. Minimum: 30 years Maximum: 85 years Pension is paid immediately, depending on the option chosen by the buyer NA Minimum: Rs.1 lakh Maximum: No upper limit Based on premium
    ICICI Pru-Easy Retirement Plan A unit linked plan which provides an assured benefit to help meet financial requirements after retirement. Minimum: 35 years Maximum: 70 years Minimum: 45 years Maximum: 80 years Minimum: 10 years Maximum: 30 years Minimum: Rs.48,000 Maximum: No upper limit Based on premium
    Reliance Smart Pension Plan This is a non-participating unit linked plan which offers a regular source of income after an individual retires. NA Minimum: 45 years Maximum: 75 years Minimum: 10 years Maximum: 30 years NA Based on premium
    Bajaj Allianz Pension Guarantee Plan This is a non-linked, non-participating plan which provides immediate annuity to individuals, with an option to choose between 6 payout modes. Minimum: Varies based on the payout mode chosen. Ranges from 0 years to 37 years. Maximum: 80 years Varies based on annuity option chosen Lifetime Minimum: Rs.25,000 Maximum: No upper limit Based on premium
    Max Life Guaranteed Lifetime Income Plan This is a non-linked, non-participating plan which offers a lifetime pension to policyholders. Minimum: 50 years Maximum: 80 years NA Lifetime NA Based on premium
    Birla Sun Life Empower Pension Plan This is a unit linked non-participating plan which offers a death benefit in addition to annuity. Minimum: 25 years Maximum: 70 years Maximum: 80 years Minimum: 5 years Maximum: 30 years Minimum: Rs.18,000 Maximum: No upper limit Based on premium
    HDFC Life Assured Pension Plan This is a unit linked plan which is suited to those looking at an investment cum protection plan. Minimum: 18 years Maximum: 65 years Minimum: 45 years Maximum: 75 years Minimum: 10 years Maximum: 35 years Minimum: Rs.24,000 Maximum: No upper limit Based on premium

    Types of Pension Plans in India:

    Pension Plan
    Retirement/Pension Plans

    Insurance companies offer a range of pension plans in India, and while each is unique in itself, one can classify pension plans into these 7 broad categories:

    1. Immediate Annuity Plans– These are plans which provide immediate pension payouts, with no waiting period to receive the pension. Most plans under this category require the premium to be paid as a single lumpsum amount, with the option to choose the time from which the annuity payout begins. Example: LIC Jeevan Akshay VI.
    2. Deferred Annuity Plans – These are plans wherein the policyholder receives a pension after a specified period of time. He/she is expected to pay premiums for the policy term, with the payment beginning once the premiums are paid. One can also choose to make a single premium payment. One can choose the frequency of annuity payout, with insurers providing the option to pay it monthly, quarterly, half-yearly, or yearly. Example: LIC Jeevan Nidhi Plan.
    3. Life Annuity Plans – These plans pay pension to the insured individual until his/her death, thereby ensuring that one has a regular source of income throughout his/her life. One can also choose to include their spouse under the plan, in which case the spouse continues to receive the pension after the policyholder passes away. Example: SBI Life Annuity Plus.
    4. Guaranteed Period Annuity Plans – These are plans akin to life annuity plans, with the only difference being that they pay assured pension for a specific period of time, even if the policyholder passes away before this period.
    5. Traditional Pension Plans – These are plans which invest the premium in safe options like government securities. These are generally risk-free, but offer lower returns. Example: SBI Life Saral Pension.
    6. Unit Linked Pension Plans – These are plans which invest in market units such as stocks, securities, or bonds. They have a degree of risk associated with them but typically offer better returns. Example: HDFC Life Assured Pension Plan.
    7. With/Without Cover Pension Plans – A with cover pension plan provides life cover in addition to annuity. These plans offer a death benefit in the event of demise of policyholder. A without cover plan does not offer life insurance, providing just annuity. Most plans can be enhanced to include life cover by adding riders.

    Why do I need a Pension Plan?

    It is easy for one to overlook the fact that retirement brings with it financial strain. We work for a majority of our life hoping to lead a stress-free retired life, but lack of money could see one coming out of retirement to make ends meet. A good pension plan ensures that one is financially secure during retirement, with the plan providing a steady inflow of funds.

    Old age is often associated with increased medical expenses, which can be a strain on financial resources, especially when one is retired. While those with a government job would receive regular pension, this might not be sufficient for the daily needs. A pension plan can enhance this income, ensuring that one doesn’t have to make changes in their lifestyle.

    Additionally, pension plans can offer decent returns on investment, ensuring that inflation doesn’t reduce the value of one’s money. Certain pension plans also provide life cover, wherein the family of the insured is protected in the event of his/her demise.

    The biggest factor which warrants the need of a pension plan is the peace of mind which it provides, ensuring that we can have a peaceful and fulfilling retired life without the strain of finances on our head.

    Features of Pension Plans:

    Some of the popular features of pension plans are highlighted below:

    • Annuity options – Most pension plans come with a range of annuity options. One can choose an option which best suits their retirement needs.
    • Early payouts – One can opt to receive the payout at an age of their choosing. Certain plans provide regular payouts from the age of 40 years, providing an option for early retirement.
    • Flexible payments – One can choose the frequency at which they receive their pension. Most policies offer the option to choose between annual, monthly, half-yearly, or quarterly payout.
    • High pension – One can choose the amount of pension they wish to receive. Most insurers do not have an upper limit on the sum assured, thereby enabling one to plan their retired life according to their lifestyle.
    • Additional security – One can opt for riders to enhance the protection offered by a basic annuity plan. These riders can be purchased at affordable rates and are ideal for those looking for additional benefits.
    • Rebates/Incentives – Most insurance companies offer rebates/incentives on premiums which exceed a certain limit. This helps in getting more pension at cheaper rates.
    • Financial independence – Retired individuals with a good pension plan need not depend on others to meet their financial requirements.
    • Protection for family – One can choose to enhance a plan by opting for life cover, wherein a death benefit will be paid to the nominee after the policyholder dies. Additionally, they can also choose to cover their spouse under a plan.

    Benefits/Advantages of Annuity/Pension Plans:

    Listed below are the benefits/advantages which pension plans provide:

    • Tax benefits – The premiums paid towards a pension plan are eligible for tax benefits under Section 80CC and Section 10(10A) of the Income Tax Act. These can help one save a considerable amount on tax each year.
    • Investment – Certain unit linked retirement plans provide one the opportunity to grow their money through strategic investments. These offer dual benefits of an investment plus insurance.
    • Assured benefits – A number of pension plans offer bonuses/assured benefits, helping one meet any additional financial obligations post-retirement.
    • Death benefit – One can supplement the basic pension plan by opting for a life cover wherein a death benefit will be provided to the nominee of the insured after his/her demise.
    • Regular income – Pension plans provide a regular source of income to policyholders, ensuring that they can lead a hassle-free retired life.

    How To Choose The Right Pension Plan?

    Choosing a good pension plan is critical to plan for retirement. Given the number of options available, one might get confused and opt for a plan which doesn’t conform to their needs. Listed below are a few simple points to consider before choosing a pension plan.

    • Know your requirements – It is important to compute the financial net one might need after retirement. Individuals with additional sources of income (rent, government pension, etc.) could opt for a plan which supplements this income. Individuals who will solely rely on the pension they receive through a pension plan must plan their needs down to last detail. Failure to do this could result in purchasing a plan which offers funds which are insufficient to meet basic requirements.
    • Basic pension or investment? – Choose whether you wish to just receive pension or whether the pension plan should double as an investment. There are numerous plans which invest in securities, bonds, stocks, etc. to offer higher returns.
    • Flexibility – Choose a plan which offers flexibility in terms of payments. Choosing a plan which offers yearly payouts without the option to change this could result in lack of money during emergencies.
    • Minimum assurance – Opt for a plan which offers a minimum assurance on the premium paid by you. This ensures that the money invested in a policy does not shrink after a specific period of time.
    • Premium – Choose a plan whose premium you can afford. Opting for a plan with a high premium could land you in trouble if you have an emergency and are unable to pay the amount on time.
    • Plan your retirement – Choose a plan which could offer you pension from the day you retire. There are certain plans which start payments only after a certain age is attained. These could pose a problem in case of early retirement.
    • Additional protection – Opt for a plan which provides additional protection to you and your family. The plan should have the option to be enhanced with a rider to cover the spouse.
    • Consult an expert – Individuals who have no idea about how pension plans work should consult an expert. One could also visit neutral websites to know the various benefits offered by a plan in order to understand it.
    • Compare – One should always compare plans from different insurers. This could help in getting a better deal, ensuring that they save money.

    How To Plan Your Retirement Using Pension Plans

    More often than not we are told to enjoy the moment. It is essential to do so and we all love to expend on an occasional trip, a car, an electronic gadget, etc. We like to make the most of what we have and spend on things we love. Along with the present expenditures, there is no harm in saving up some money to spend in the future too. Various insurance companies, today, offer pension plans that help individuals plan a comfortable tomorrow. Each of the plans come with unique features that you can choose based on your requirements, income and age.

    Planning your retirement is no rocket science. All you need is a plan and some financial help.

    1. Purchase a pension plan right away: Making an early start will help individuals enjoy more benefits, thanks to the power of compounding. An individual who purchases a 35-year pension plan at the age of 25 will most definitely have a larger retirement corpus than an individual who purchases a 25-year plan at the age of 35. This is so because of the obvious fact that funds accumulate since it is compounded at a certain rate of interest every year. The difference can be found not only in plans that differ by 10 policy years as mentioned above but as many as 5 years too. So, go ahead and purchase a pension plan today in order to have a peaceful tomorrow.
    2. Chalk out a plan: You can buy a pension plan based on how you dream of spending your post-retirement life. If you wish to live in comfortable space and go on a trip once a year, you should make a financial plan based on such ideas. You may also want to take into consideration your day-to-day expenses and expenditures of a dependent spouse too. Apart from these, you should ideally set aside a certain sum for medical emergencies.
    3. Seek help from a financial expert: After you have planned how you want to spend your twilight years, you can contact a financial expert to help you choose the best pension plan based on the inputs given by you. While you make the plan as to how exactly you wish to live your later years, the financial expert will translate them to numbers. He will narrow down on a few pension plans and advise you to buy a plan that best suits your requirement and is affordable in terms of your present-day income.
    4. Review your pension plan from time to time: The process does not end at just purchasing a pension policy. In order to make sure one’s investments will give good returns, it’s important to track the plan regularly. You may need your financial expert to help you out with this as well. If you have chosen a ULIP (Unit linked insurance plan), the expert will make sure that your investments are performing well. If not, he will switch the fund type or allocate small sums in 2-3 different fund types. Also, he can make certain alterations based on your change in plan, if any, for your retirement years.
    5. Avoid spending your savings: It is important to exercise restraint when it comes to spending money that you have invested for the future. While certain pension plans have the option of availing loans, avoid doing so unless absolutely necessary. If you face an emergency, withdraw the amount you require only after making sure you’ve exhausted all other options. As long as you avoid touching your pension funds, you will most definitely achieve saving up huge money that you can enjoy in the future.

    By making the right plan and purchasing the best pension plan, you are sure to lead a blissful post-retirement life without having to worry about making ends meet or letting go of things you dream to do.



      Mistakes to Avoid when Planning for your Retirement

      In order to truly enjoy the golden years of your life without any financial troubles, it is vital to start planning for this stage of your life from a young age. Retirement planning involves assessing your current stage of life, determining your retirement goals, estimating the expenses that you might have to incur during your retirement, and creating and implementing a savings plan that you will need to follow diligently throughout your employment years. There are also certain mistakes that you need to look out for and avoid when planning for your retirement, such as:

      1. Underestimating your retirement needs: In order to have a sufficient sum of money for your retirement years, it is necessary to first determine an accurate retirement corpus. The amount that you will need to save should be reflective of the kind of lifestyle you wish to have in the future. Also, given how steeply the cost of living can increase on an annual basis, you will need to make sure to consider inflation when determining your retirement fund. Further, if you have any dependents, you will also need to take their needs into consideration before deciding on a certain retirement corpus.
      2. Not starting early: Most people put off retirement planning until their 40s or 50s. While it is never too late to start saving for your retirement, it is certainly advisable to start planning for it from a young age when you don’t have too many financial commitments. Also, the earlier you start saving for your retirement, the more likely it is that you will have a significant corpus by the time you retire. Thus, at least a chunk of your monthly salary should go towards your retirement fund.
      3. Borrowing from your retirement fund: During the course of your life, it can be tempting to borrow from your retirement fund, especially when you are in need of emergency liquidity. However, you should avoid doing this at all costs. Your need for funds will only increase as you grow older. Thus, it is vital that you keep your retirement corpus intact so you are able to use it when you need it the most.
      4. Not diversifying your investments: Ideally, if you want to receive the best returns, you should invest in a number of financial instruments, rather than just sticking to one. Thus, your investment portfolio should have a mix of assets including FDs, mutual funds, bonds, real estate, etc. When investing in market-linked financial options, make sure to take your financial goals and appetite for risk into consideration and invest accordingly. In addition, you should also consider purchasing a retirement or annuity plan from a life insurance provider if you would like to receive regular payouts during your retirement years.
      5. Not accounting for medical needs: Hospitalisation and medical needs are a significant area of expense for most people above the age of 60 years. Considering the rise in hospitalisation costs, it is vital that you account for medical needs and decide your retirement corpus accordingly. If you have a spouse or parents that are financially dependent on you, make sure to also account for their medical needs.


      After years of hard work, you should be able to enjoy your retirement without any financial hassles. Thus, make sure to create a retirement plan today and review it regularly. Ideally, as you start to earn more, you should also be saving more. Doing this on a consistent basis will ensure that you have a significant amount of money saved up in time for your retirement.

    Eligibility Criteria for Pension Plans:

    The eligibility criteria for pension plans comes down to three main aspects, which are given as follows:

    • Entry Age – One could purchase a pension plan after attaining a certain age. Certain insurers offer plans whose minimum entry age is as low as 18 years, while others ask for individuals to be over the age of 30 years in order to purchase them. Similarly, there is an upper limit on the entry age as well, with this being around 70 years in most cases.
    • Vesting age – This is the age at which one starts receiving pension. This could range from a minimum of 40 years onwards, depending on the conditions in place.
    • Premium – The pension one receives depends on the premium they pay. Most insurers have minimum premium requirements for the pension plans.

    Pension Plan Riders:

    It is possible to enhance the protection offered by a pension plan by choosing additional riders. Listed below are some of the popular riders which can be availed in the country.

    • Accidental death/disability rider – This rider provides an additional sum assured in the event of policyholder’s death due to an accident. It also provides financial support if the insured individual becomes disabled while the plan is in force.
    • Critical illness rider – This rider provides protection against critical illnesses. The number of illnesses covered by the rider depend on the company offering it. The insured will receive financial aid if he/she is diagnosed with a terminal illness while the policy is active.
    • Term rider – Opting for this rider ensures that the nominee receives a death benefit after the insured passes away. It essentially transforms a normal pension plan into a life insurance plus pension plan.
    • Waiver of premium rider – Under this rider, future premiums are waived if the insured meets with an event which leads to disability, resulting in loss of income. It is also valid if the insured is diagnosed with an illness post which premium payments are waived.

    What are Participating and Non-Participating Pension Plans?

    A participating pension plan is one in which the insured receives a bonus component in addition to the regular sum assured. This could be in the form of a reversionary bonus, which is at the discretion of the company. It is basically a plan which participates in the profits of the fund in which the money is invested. The insurance company has the discretion to supplement the sum assured with any bonus in these plans.

    A non-participating pension plan is one which does not accrue any reversionary bonus, with all benefits clearly stated to the policyholder. It does not partake in any profits earned by the fund.

    What is Employees Provident Fund and Employees’ Pension Scheme?

    The Directive Principles of State Policy state that the government shall try its best to ensure that citizens of the country have means to meet basic requirements, including those arising out of old age. As such, the Employees’ Provident Fund Organisation was set up to monitor the Provident Fund Scheme and a Pension Scheme, in addition to an insurance scheme.

    The Employees Provident Fund (EPF) and Employees’ Pension Scheme (EPS) are designed to provide financial assistance to individuals during their retired life. They act as a savings tool, whereby employers and employees contribute a certain portion of their monthly income into a pool, with this investment earning interest.

    EPF applies to any organisation which undertakes a task under Section 1 of the Employees’ Provident Fund Act, and employs over 20 people. Both the employer and employee make a contribution equivalent to 12% of the basic DA of an employee’s salary. This contribution is split into two components, with one going to the EPF pool and the other to the EPS.

    Scheme Employee contribution Employer contribution
    EPF 12% 3.67%
    EPS NA 8.33%

    As indicated in the table, both the funds now get a certain deposit each month. The only difference between both of them is the fact that while the EPF account earns an interest which is compounded annually, there is no provision for interest under EPS.

    It is possible to withdraw the money under EPF if one is unemployed for a period of two months or more. One can also appoint a nominee who will receive the funds in the event of death of EPF accountholder.

    What is PM Pension Scheme?

    The Pradhan Mantri Atal Pension Yojana is a scheme designed to offer retirement solutions to individuals belonging to the unorganised sector. With a majority of the Indian population working in unorganised sectors, there was a need for a pension plan for them. Anyone between the age of 18 and 40 years can participate in this scheme, with them receiving a pension once they are 60 years old.

    Individuals who joined the scheme before December 31, 2015 will be eligible for a government co-pay wherein the government will contribute an amount equivalent to half the contribution of the individual, subject to a maximum of Rs.1,000 per year for a period of five years.

    A savings bank account should be opened by the individual looking to contribute towards this pension scheme. One will receive a pension ranging between Rs.1,000 and Rs.5,000 per month after retirement. The scheme provides a provision for a nominee, wherein he/she will receive the pension if the accountholder dies.

    Atal Pension Yojana – Eligibility, Benefits, and Features

    The Atal Pension Yojana (APY) is a pension scheme that is backed by the Government of India. This scheme was launched in order to help individuals save for their post-employment years. This scheme is ideal for individuals working in unorganised sectors and people without a steady flow of income. The scheme was announced as part of the 2015-2016 Union Budget and is currently being administered by the PFRDA (Pension Fund Regulatory and Development Authority), through the NPS architecture.

    The key benefit of this scheme is that individuals can choose to either invest a sum of Rs.210 every month for a period of 42 years or invest Rs.1,454 every month for two decades. This scheme provides a guaranteed monthly pension ranging between Rs.1,000 and Rs.5,000, based on your investment amount. In order to avail the benefits offered by this scheme, individuals will have to open a savings account with a post office or a bank.

    Eligibility Criteria for the Atal Pension Yojana Scheme

    • This scheme can only be availed by Indian citizens.
    • The Atal Pension Yojana (APY) can be availed by individuals between the ages of 18 years and 40 years.
    • The exit age for the APY scheme is 60 years.
    • The minimum contribution period for this scheme is 20 years.
    • Only individuals with an active savings account can join this scheme.
    • Under this scheme, the Aadhaar will be taken as the primary KYC. Thus, it is recommended that you have a mobile number and Aadhaar for added ease. In case your Aadhaar details are not available at the time of subscribing to this scheme, they can be submitted on a later date.

    Key Features and Benefits of the Atal Pension Yojana Scheme

    • The subscriber is eligible to receive a pension of Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000, or Rs.5,000. Further, the subscriber can also increase or decrease their pension amounts once a year, during the accumulation period.
    • The Government of India will contribute up to 50% of the contribution made by the subscriber of Rs.1,000, based on whichever is the lower amount, for a period of 5 years. Government co-contributions are only available for those individuals who are not taxpayers and are not covered by Statutory Social Security Schemes.
    • In case the subscriber delays the payment, the bank will levy certain nominal default charges.
    • If the subscriber passes away, the pension amount will be paid to the spouse. Upon the death of both spouses, the pension corpus will be made available to the nominee.
    • Subscribers cannot exit this scheme before the age of 60 years. Individuals will only be allowed to exit from this scheme in case of a terminal illness or death of the beneficiary.

    How to apply for the Atal Pension Yojana online?

    In order to apply for the Atal Pension Yojana scheme, you will first need to download the APY subscriber form from the official website of the bank in which you hold your savings account. APY forms are usually available on all bank websites. After downloading the page, you will need to fill it up with the required details and submit it to your bank branch. You will also be required to submit certain additional documents, after which your APY account will be opened.

    National Pension System & its Benefits?

    The National Pension System (NPS) was launched by the government in 2004 with a vision to provide a pension to all retired citizens of the country. Open to employees from both, the government sector and private sector, it invests the money in funds which are managed by the Pension Fund Regulatory and Development Authority (PFRDA).

    One can choose between two account types, namely a Tier-1 account, which is designed to promote savings for retirement and a Tier-2 account. Individuals cannot withdraw any money from a Tier-1 account, ensuring that they have a corpus for retired life.

    A Tier-2 account, on the other hand permits one to withdraw money from it. It is designed to promote voluntary savings.

    The National Pension System offers a range of benefits to those looking for steady pension after retirement. Some of them are highlighted below:

    • One can choose the kind of account they want, with it providing the option of opening either a savings account or a retirement account.
    • Being a government initiative, it is transparent, with members given a daily update on their contribution. It also helps one track the money, giving them the chance to modify/increase contributions to meet any future requirement.
    • The entire process is simple, with each member provided a unique Permanent Retirement Account Number (PRAN). Opening an account is easy, thanks to nodal offices present across the country.
    • The scheme is regulated by the PFRDA, ensuring that the money is not invested in risky ventures.
    • Even if a member were to move a job, he/she can continue using the same PRAN, ensuring that there are no cumbersome procedures to transfer the money from one account to another.
    • It provides tax benefits to individuals. Those with a Tier-1 account are eligible for tax deductions on their contributions under Section 80C of the Income Tax Act. Additionally, any appreciation of the contribution and any money used to purchase annuity is tax free.

    Pension Claim Acceptance/Rejection Scenarios

    1. I am a 38-year old engineer who earns Rs.80,000 per month. My wife earns around Rs.55,000 per month. I have a term insurance cover for Rs.1.5 crore and my wife has a term plan for Rs.1 crore. Together, we pay around Rs.30,000 per year for the term insurance. We also have other investments in mutual funds, SIPs, PPFs, etc. We invest around Rs.25 per month in various SIPs. We also have other lump sum mutual fund investments intended for the long term. I am thinking of purchasing a retirement plan for us. How much should I invest every month to get a return of Rs.2 crore at the end of 20 years?

    2. When you are calculating your retirement corpus, it is better to calculate the amount based on your current income and expenses. You may inflate the expenses by a certain level and determine the amount you may need after your retirement. The amount may vary based on the type of plan chosen and the interest rate offered.

      If you are considering retirement plans, you may opt for plans with or without annuity options. In the case of pension plans, a certain amount will be provided as lump sum payment and the rest will be paid as annuity payments. If you are looking forward to get lump sum payment of Rs.2 crore at the end of 20 years, you may also opt for an endowment or ULIP plan. If you choosing a ULIP, make sure that you factor in the risk while calculating the return amount.

      Considering a conservative rate of return of 8%, you may have to invest at least Rs.33,000 per month to get Rs.2 crore at the end of 20 years. Your actual returns from a specific plan may vary based on various other factors. If you an endowment plan, the risk is extremely minimal and you can get guaranteed returns at the end of the policy term.

    3. I am a 56-year person employed in a private company as a senior manager. I am planning to retire at the age of 60. I have my own house and enough savings to take care of my needs. At present, I am planning to buy an annuity plan to take care of my monthly expenses after retirement. I am a little worried about the potential fluctuations in interest rates. Will my pension amount reduce because of fluctuations in interest rates? Is there a way to keep the interest rate stable for my annuity plan?

    4. For annuity plans, the interest rate remains locked for life. This is not similar to a retirement plan where you start building a corpus from a very young age. At this age, you might be opting for an immediate annuity plan. If that is the case, you don’t have to worry about fluctuations in interest rates. When the annuity payments start, there will not be any change in the amount you are getting year after year.

    5. Rajesh and Sonal Chatterjee (aged 38 and 34 years, respectively) are employed and have a combined salary of Rs.1.5 lakh in their household. They live in their own house which has no outstanding mortgage. They have bought a new house recently and rented it out for Rs.25,000 per month. They have an outstanding mortgage of Rs.15 lakh on this new property. In addition to this, they have an outstanding car loan worth Rs.7 lakh. They pay EMIs worth Rs.45,000 per month for these two loans. They also have a high-value family floater health insurance coverage for Rs.20 lakh.

      In addition to their properties, they have also invested in mutual funds worth Rs.5 lakh and PPF worth Rs.5 lakh. They also have EPF worth Rs.4 lakh each. They have two children aged 8 years and 6 years. The couple has invested in children’s fund worth Rs.10 lakh each for their children. They pay around Rs.50,000 a year for this endowment plan. They both have term insurance worth Rs.1 crore each. Despite all these investments, they still have not decided to invest in a retirement plan. How much investment will be adequate for them considering the fact that they both want to retire by the age of 55 years? How much pension can be expected by investing in these retirement plans?

    6. The couple has a solid investment so far. However, they do need a retirement plan if they wish to leave a considerable portion of their assets for their children. Jointly, they both have close to 20 years of productive life left in them before they retire. They have taken care of almost all the major expenses except for retirement. Rather than investing in a unit-linked retirement plan, they can opt for low-risk endowment covers to build their retirement corpus.

      The couple has the option of investing either in a single premium pension plan or a yearly premium retirement plan. If they start investing around Rs.25,000 per month for the next 20 years, they can get a pension of up to Rs.10 lakh per year following their retirement age. Considering the fact that they can make this investment after the present expenses, they can build a decent corpus as mentioned above. They may also choose plans that provide a portion of the invested money as lump sum payment and the remaining amount as a yearly annuity. In this way, they can take care of their expenses following their retirement.

    7. I am a 32-year old man working for a private company. I earn Rs.55,000 per month. I already have a term plan for Rs.1.5 crore. My wife is also working in a private company and she earns Rs.30,000 per month. I have been investing in mutual funds for the last three years. I also have fixed deposits and PPF investments. I am now looking forward to investing in retirement and pension plans. When is the best time for me to invest in these plans? Also, how much money should I invest?
    8. You may choose to invest in retirement plans at any age you can afford adequate disposable income. Unlike term plans, the cost of coverage in retirement plans may not change a lot with regard to your age. However, if you enter early, you can build a large corpus for your retirement. If you can afford premiums for your retirement plan, you need to start investing right away without any delay.

      The amount you need to invest is largely determined by the maturity amount you wish to have. Most of the retirement plans are endowment policies that offer guaranteed returns to policyholders. Hence, the risk is minimal here. If you have a higher risk appetite, you may also consider investing in market-linked plans and get higher returns. You can check with the insurer directly before deciding on the amount you can invest. Many retirement plans cap the minimum age of entry at 35 years. You can use the EMI calculator in the insurer’s official website to determine the exact corpus you are likely to have.

      You may also have to choose whether you need lump sum payment or annuity. You and wife can also invest in the same pension plan and get joint life coverage. Based on a rough estimate, you need to invest at least Rs.10,000 per month over a period of 20 years if you wish to have around Rs.35 lakh in lump sum along with yearly annuity payments. Explore the different options available in the market before making a final decision.

    Pension Plan FAQs:

    1. What is the difference between immediate annuity and deferred annuity pension plans?

    2. For example, let’s say you subscribe to a pension plan by choosing a deferment period of 10 years. For the next 10 years, you have the pay premiums and build a corpus as per the chosen plan. The amount invested in the fund will continue to earn for the next 10 years. After the completion of this period, the insurer will start paying you annuity as mentioned in the policy schedule. You will get annuity payments based on the value of funds accumulated over these years.

    3. What is the minimum age at entry for pension plans?

    4. The minimum age at entry for a policy will vary based on the insurer’s terms and conditions. The eligibility criteria of a policy can be found in the policy brochure.In most cases, the policyholder must be over 18 years of age. Some pension plans set the minimum entry age at 30 years. In case of some immediate annuity plans intended for senior citizens, the entry age could be as high as 55 years. Based on the type of plan chosen, the entry age criteria will differ for various pension plans.

    5. Do pension plans also offer a life cover against death to the policy buyer?

    6. Not all pension plans offer a risk cover against death to the policyholder. Thus, make sure to read through the policy brochure carefully and familiarise yourself with the inclusions, exclusions, and policy benefits before purchasing the policy.

    7. If I purchase a pension plan, will I receive annuity payments throughout my life?

    8. You will receive annuity payments as per the annuity option chosen by you. Most insurers offer a number of annuity payout options to policy buyers. Thus, you can choose a payout option as per your financial needs. There are plans that offer annuity throughout the life of the policyholder. Upon the death of the policyholder, the sum assured amount will be provided to the insured’s nominee or legal heir.

    9. What is the grace period?

    10. In order to keep your policy in force, you will need to pay the due premiums to your insurance provider as per the premium payment mode that you opted for while buying the policy. However, insurance providers also offer a grace period after the premium payment due date, within which the premium will have to be paid. If the premium is not paid during the grace period, the policy coverage may lapse. The grace period that is usually offered by an insurance company ranges between 15 days and 30 days.

    11. Can policy buyers choose the annuity payout frequency at the time of purchasing a pension plan?

    12. Most insurers give policy buyers the option to choose the annuity payout frequency. Thus, you can opt to receive payments on an annual, half-yearly, quarterly, or monthly basis.

    13. Are policy buyers required to pay the premium as a lump sum to the insurance provider when purchasing an annuity plan?

    14. Most insurance providers give policyholders the choice to pay the premium for a limited number of years during the policy term or as a lump sum at the time of purchasing the policy. However, the premium payment mode will vary from plan to plan. Thus, make sure to opt for a pension plan with a premium payment mode that is well-suited to you.

    15. Can insurance riders be purchased along with pension plans?

    16. Yes, you can choose to purchase any rider that the insurance provider offers along with the base policy.Some of the common riders offered along with pension plans include term assurance rider, critical illness rider, waiver of premium rider, accidental death or disability benefit rider, etc.

    17. When should you purchase a pension plan?

    18. Pension plans are ideal for individuals looking to secure their post-employment years. Thus, if you wish to receive a fixed source of income during your retirement, you should consider purchasing a pension plan. It is advisable to purchase a pension plan as soon as you can to ensure your retirement years are financially secure.

    19. Can pension plans be surrendered?

    20. You may be able to surrender a pension plan based on the policy terms and conditions. However, in most cases, insurance companies do give policyholders the option of surrendering their insurance policy if the policy has acquired a surrender value. That being said, it is advisable to keep your policy in force in order to fully enjoy the coverage and payouts that will be offered to you as part of the policy benefits by the insurance provider.

    21. What is vesting age and vesting date?

      A. The age from which the pension is paid is called the vesting age. The vesting date is the date from which the pension starts. For example, a policy with a vesting age of 60 years will begin paying pension only after the individual turns 60 years old.

    22. What is annuity?

      A. Annuity is a defined amount of money paid to an individual at regular intervals of time, typically after he/she retires. An annuity plan is a contract between the insurer and the insured, wherein the insured makes payments to the insurer, with the insurer providing regular payouts after a specified period of time.

    23. Is it possible to purchase a pension plan online?

      A. Yes, most insurance companies provide the option to purchase a pension plan online. There are a few pension plans which can be purchased only online.

    24. Is it possible to increase the payout amount for my pension plan?

      A. Most pension plans do not provide the option to modify the payout amount after the plan has been purchased. An insurer can, however, make exceptions based on the rapport a customer shares with them. It is advisable to check this with the insurer before purchasing a policy.

    25. I wish to withdraw the amount in my pension fund before I retire. Is this possible?

      A. Most pension plans do not offer the liquidity to withdraw money before the vesting age. This could vary from plan to plan and one should check this with the insurer before buying it.

    26. Which is better – A government pension scheme or a pension plan by an insurer?

      A. Both schemes are designed with a specific purpose in mind. One should consider the purpose before choosing one. Government pension schemes are primarily targeted to those who have no other means of income after retirement. These are more affordable but have limitations on the amount one can receive. Pension insurance plans, however, provide one an opportunity to customise a plan based on their requirement.

    News about Annuity/Pension Plans

    • UP Govt: Pension scheme for specially abled people has now become completely online

      The pension scheme offered by the Uttar Pradesh government for the specially abled people has become completely online according to an official from the state. The government has also instructed state officials that specially abled people are not harassed in the name of physical verification.

      In November, the government has identified more than 47,000 people eligible for the pension scheme. Officials are instructed to make the first installment of the payment by next week for these beneficiaries. District officials in the state received all the instructions from Additional Chief Secretary of Handicap Welfare Mahesh Gupta.

      The scheme benefit has been increased to Rs.500 per month from Rs.300 per month. The budget for 2018 has been increased to Rs.575 crore from Rs.333 crore. This scheme is available for those who have more than 40% disability. The state government made this announcement after receiving complaints from beneficiaries that they have a tough time providing disability certificate.

      15 November 2018

    • NRI groups to invest in Kerala regular saving schemes

      Around thousand people have joined Kerala’s Pravasi Chitty scheme since it opened for registration on October 25. A total of Rs.12 million has been invested till now.

      Kerala, in order to fund its infrastructure projects, has started the Pravasi Chitty scheme.

      Kerala with the help of this scheme aims to sign up to one million subscribers in the next few years and also raise up to Rs.100 billion over the next five years.

      The scheme is launched by Kerala State Financial Enterprises (KSFE), which is a non-banking company and is also owned by the Government of Kerala and is designed only for non-resident Indians (NRIs).

      14 November 2018

    • Nabard told by the Government to initiate pension process in RRBs

      National Bank for Agriculture and Rural Development (NABARD) has been directed by the Government to initiate the pension scheme for close to 30,000 former employees of regional rural banks who finally won the long battle of getting parity in their pension with employees of nationalised banks in April.

      A communication was sent to all the chief executives and chairmen of regional rural banks by the government to bring into effect the decision.

      Former RRB employees will now receive pensions at par with their counterparts from the nationalised banks. It has been decided by the department of the financial service that employees who have working since 1 September 1987 will be eligible for the pension scheme, while the employees who started working for RRBs before 1 April 2018 will come under this pension scheme.

      27 August 2018

    • Nagaland launches e-pension system and CM dashboard

      CM Neiphiu Rio launched the e-pension system and the CM dashboard to enable management of all state government schemes in a single frame. The electronic national pension system (e-NPS) helps the state government manage the contributions made by the employees who have subscribed to NPS. It helps them download the file preparation utility (FPL) which will eventually be uploaded on the National Securities Depository Limited (NSDL) portal. The CM dashboard is a window wherein all e-government schemes being implemented in the state can be viewed. The CM will be able to understand the performance of the schemes and take decisions accordingly.

      17 August 2018

    • Insurance regulatory body relaxes rules to help policyholders claim pension money

      The insurance regulatory body, Insurance Regulatory and Development Authority (IRDA) through a circular dated 3 August has relaxed rules on pension products and has asked the policyholders to completely withdraw money accumulated through the pension products purchased by them. Money worth Rs.15,166.47 crore is yet to be claimed by the policyholders. The IRDA had asked the insurance company to ensure that the policyholders receive their dues. The regulatory body itself is making efforts to make it easier for the policyholders to receive their claim amounts. As per the rules laid down by the IRDA, any person who has availed a pension plan is eligible to receive an annuity amount of minimum Rs.1,000 on a monthly basis. However, a minimum purchase price is specified by the insurers for their annuity products. The insurers cannot annuitise if the accumulated amount is low and since the insured is allowed to only withdraw one-third of the corpus, the insurer is left extra money.However, IRDA has made it clear that any accumulated amount which is yet to be claimed and is not sufficient to purchase the minimum annuity amount must be refunded back to the policyholder as a lump-sum amount. Also, according to the income tax rules, any amount that is taken as a lump sum is not taxable.

      9 August 2018

    • Rural bank employees might get the pension nod

      In what could be an iconic move by the Supreme court, in a bid to aid the poor as the Government is doing so through numerous schemes as well as the national health insurance policy which is bound to release soon, rural bank employees might be eligible for pension as well. As of now, the pension scheme is applicable for national bank employees, but the benefit of pension might be extended to rural bank employees as well. The push for the implementation of the pension by rural banks across the country has already got the nod by the Finance Minister of the country, Piyush Goyal, but the approval is pending from the part of the Supreme Court. To strengthen their case, Rural Bank employees issued a poignant note to the Supreme court, that states, we beg to submit the hardships and piteous state of the retired employees of Regional Rural Banks (popularly known as Gramin Banks) and their family members due to the denial of pension to this section of employees. If the petition by rural bank employees is cleared by the Supreme court of the country, then the pension scheme for rural bank employees will be inducted as one of the already existing government schemes that have been setup to aid the poorest of the poor.

      6 August 2018

    • SBI offers auto-debit facility for NPS accounts

      The country’s largest lender State Bank of India (SBI) is now offering auto debit facility for its customers who are investing in the National Pension System (NPS) account. This announcement was made by SBI through Twitter. This auto debit feature will allow people to make regular NPS contributions without having to go through the hassle of paying it at a branch office.

      NPS is a voluntary pension system offered by the Government of India. There is no fixed interest rate under this scheme as it provides returns through market-linked investments. Investors can design their own portfolio by choosing various instruments such as equities, government bonds, and corporate debt instruments.

      NPS currently offers two different types of accounts - Tier 1 and Tier 2. Tier 1 account is strictly a pension scheme that does not allow any withdrawals. Also, it provides tax benefits for the investments made. Tier 2 account, on the other hand, is slightly flexible as it allows users to withdraw money whenever they require. It is worth noting that there are no tax benefits associated with Tier 2 accounts.

      4 August 2018

    • Senior citizen scheme kicks off in Jaipur

      With the country on the brink of launching the biggest healthcare service in history, labelled ModiCare by the media after Obama’s historic Obama care in the states, the Government which is looking into all facets of society to make some considerable improvements in the lifestyle of its citizens. The Ayushman Bharat healthcare service will benefit 500 individuals and comes with a host of benefits including a insurance of Rs.5 lakh per year. While the healthcare service is still in its setting up phase, the Government has rolled out the senior citizen’s scheme that will help the elderly population in the country immensely. The senior citizen scheme in the last few days has been rolled out in Jaipur, supported by both the Central and the State Governments. Coming with a host of benefits, the Senior citizen scheme comes with benefits such as a number of devices to help them cope with their situation and in addition, the Artificial Limbs Manufacturing Corporation of India, a PSU under the Central government, will take care of one-year free maintenance of the aids and devices including walking sticks, elbow crutches, walkers, tripods, hearing aids, artificial dentures, and spectacles. To be eligible for the scheme, subscribers have to be in the BPL category, have to submit their aadhaar card, PPO of national old age pension scheme or state old age pension scheme, and should be over 60 years old.

      16 July 2018

    • Kerala Government to review pension scheme for Government employees

      With government employees in Kerala utterly displeased with the current pension scheme, deeming that the returns from the scheme are irrelevant, the Government of Kerala said they will review the schemes and analyse what can be done. According to Finance Minister T.M. Thomas Isaac, who is looking into the matter, he said that a complete scrapping of the current pension scheme which was formulated by the previous government will be almost impossible and will result in serious ramifications.

      He added that due to the pension schemes formulated by the previous government, even tax collectors have taken a hit. The government apparently set a tax bracket of 20% so that they use these collections to benefit other schemes. However, to put things in place, Cooperation Minister Kadakampally Surendran announced that cooperative banks of Kerala will come into existence by Onam and will assist government employees with pensions, tax collections and so on. He also added that they will rolling out the ‘Muttathe Mulla’ scheme for women that will benefit women with a 9% interest over deposits and help them avoid banking on moneylenders in times of need.

      25 June 2018

    • Rs.500 crore credit enhancement fund to be unveiled by govt. soon

      A senior official from the Finance Ministry said that the government will soon release Rs.500 crore credit enhancement fund. The fund which is expected to be unveiled next month will be utilised to further infrastructure investments. The idea of the fund was initially made known in the budget for FY 2016-2017. The Joint Secretary (Infrastructure, Policy and Finance), Kumar Vinay Pratap of the Ministry of Finance said that the separate fund will help improve the credit ratings of the bonds provided by infrastructure companies. The fund will be raised by pension and insurance funds. The India Infrastructure Finance Company (IIFC) will act as a non-banking financial organisation and provide the initial corpus for the dedicated fund.

      Pratap said that while regulatory bodies have mandated the rating for long-term insurance and pension funds to have an ‘AA’ rating, the infrastructure bonds usually have a ‘BBB’ rating. This is hence giving rise to a mismatch.

      13 June 2018