A pension plan is a type of savings or investment plans which you can avail for yourself so that you can live a standard life after retirement. A pension plan accumulates a part of your savings for over a period of time which you can finally use after you have retired.
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.
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 2020:
|Pension Plan||About the plan||Entry Age||Vesting Age||Policy Term||Annual Premium Amount||Sum Assured|
|LIC New Jeevan Nidhi Plan||A conventional ‘with profits’ pension policy that offers both savings and protection benefits. 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||As per the policy document||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% during the first five policy years. It also provides an option to avail enhanced coverage by purchasing the SBI Life – Preferred Term Rider.||Minimum: 18 years Maximum: 60 years for regular premium policies, 65 years for single premium policies.||Minimum: 40 years Maximum: 70 years||Minimum: 5 years for single premium policies, 10 years for regular premium policies 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 annual premium: 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/100 years (based on the annuity option chosen).||Pension is paid immediately, depending on the option chosen by the buyer||NA||Minimum: Rs.1 lakh for offline distribution channels, Rs.1,50,000 lakh for online distribution channels Maximum: No upper limit||Based on premium|
|ICICI Pru-Easy Retirement Plan (Regular Premium)||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.||Minimum: 18 years Maximum: 65 years||Minimum: 45 years Maximum: 75 years||Minimum: 10 years for single premium policies, 15 years for limited and regular premium policies Maximum: 30 years||Varies based on the premium payment term, premium payment mode, etc.||Based on premium|
|Bajaj Allianz Pension Guarantee Plan||This is an immediate annuity policy that provides policy buyers 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||NA||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 (55 years for plans that are sourced under QROPS) Maximum: 80 years||NA||Annuity is offered for the annuitant’s lifetime||NA||Based on premium|
|Aditya 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 annual premium: Rs.18,000 Maximum: No upper limit||Based on premium|
|HDFC Life Assured Pension Plan-ULIP||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 annual premium: Rs.24,000 Maximum: No upper limit||Based on premium|
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:
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.
Some of the popular features of pension plans are highlighted below:
It is important that you consider your future needs and goals and based on that decide whether you need a pension plan or not. There are different types of pension plans that you can purchase depending on your long-term goals and financial capabilities. Here we will look at the types of pension plans that you can purchase for yourself.
There are two types of retirement plans that you can purchase for yourself:
This is a type of pension plan where your employer is the master policyholder. In this type of plan, both you (employee) and the employer contribute a specific amount of money into a fixed fund on a monthly basis. These contributions would be helpful to you after you have retired from your job. Your end of the contribution is deducted from your salary.
There are three types of work-based pension plans that you can come across:
Personal pension plans are those types of plans which you can purchase personally depending on your future goals and financial capabilities. Unlike work-based pension plans, you can choose the contribution amount and the funds in which you would like to invest your money. You can also choose the cover amount depending on factors such as your age, financial capabilities, future goals, annual income, etc. There are different types of personal pension plans which you can invest in depending on your needs:
One of the biggest advantages of purchasing a pension plan is that it allows you to receive various tax benefits. According to Section 80CCC of the Income Tax Act, 1961, you can enjoy tax benefits on the investments you have made to your retirement fund. You are also allowed to withdraw one-third of your corpus under certain pension plans in case you have any financial need and you won’t have to pay any taxes on it.
You can purchase a pension plan if you have long-term goals to take care of. Pension plans allow you to achieve your financial goals even when you have stopped working. However, it is important that you are extremely clear regarding your future needs. You must properly research and compare various plans, and only when you are sure should you purchase a pension plan which you believe will be suitable for you.
Listed below are the benefits/advantages which pension plans provide:
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.
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.
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.
The missing links in pension schemes in India
There are various people in India who are above the age of 60 years and are below the poverty line. The constitution according to Article 41 reminds the Government of India to ensure that it takes care of these people and provides them with a pension which would allow them to sustain and fulfill their day-to-day needs. Thus, people above the age of 60 years also known as senior citizens can avail such schemes for themselves. However, one of the drawbacks of such schemes that the pension provided may not be sufficient for an individual to take care of his/her needs.
For example, the Indira Gandhi Old Age Pension Scheme is one of the pension schemes which offers a meagre sum of only Rs.200 as a pension to the policyholder. For people who fall in the age bracket of 60 years to 79 years get paid a pension of Rs.300 where Rs.200 is paid by the Central Government and Rs.100 is paid by the State Government. The scheme covers only 3.5 crore elderly people out of the 10.3 crore elderly people in the country.
People who are above the age of 80 receives a pension amount of Rs.500 only. This tells us that there is a huge need to enhance the pension amount so that the senior citizens are able to not only fulfill their needs but also live a dignified life.
Atal Pension Yojana (APY) is another pension scheme which aims to provide pension to people belonging to the unorganised sector. The budget allocated under this scheme has been significantly refused from Rs.170 crore in 2017-18 to Rs.155 crore in 2018-19.
There have been various demands and protests over the years where the pension amount has been asked to be increased. Despite all the protests, the government is yet to take any formidable action and increase the pension amount.
Along with the pension amount which is meagre in nature and simply not enough for a person to take care of his/her needs, other problems such as linking of Aadhaar card, poor coverage, and improper allocation has only added to the problems. It is time that the government takes steps in order to ensure that the allocation is done in a smooth and proper manner so that the senior citizens in India are able to receive proper pension amount and take care of their daily needs.
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:
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.
The eligibility criteria for pension plans comes down to three main aspects, which are given as follows:
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.
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.
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|
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.
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.
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.
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.
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:
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?
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.
What is the lock in period for Varishta Pension Bima Yojana?
The lock in period for Varishta Pension Bima Yojana is 15 years. However, you must either consult the concerned authorities associated with this pension plan or seek the help of a financial advisor so that you can be completely sure about your future needs and check whether it will be suitable for you to invest in this plan. Once you are sure about your future goals, you can then go ahead and purchase this particular pension plan for yourself.
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?
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.
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?
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.
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 Fund and Regulatory Development Authority Body (PFRDA) is the body which regulates the Pension Funds in India and exercises control over the pension fund managers (PFMs) in India. PFRDA has made it clear that PFMs are supposed to invest money only in corporate bonds with AA ratings. It is understood that the money will be allowed to invest in AAA ratings as well in the near future. A committee has been set up by PFRDA in order to streamline the investment norms.
Regulations rare tight ad PFMs are supposed to closely monitor the companies before investing in them. Hence, it is relatively safe to invest your money in these types of funds.
Both mutual funds and pension plans are good investments. Since you can invest Rs.10,000 per month, you can start investing it in a systematic investment plan (SIP) and continue to accumulate earnings till the date of your retirement. You can maintain a diversified portfolio with a combination of debt and equity funds. With a well-planned investment strategy, you can get solid returns at the time of your retirement (say 58 years).
Many mutual funds allow short-term capital gains in the form of systematic withdrawals. You may also get long-term capital gains at the end of the mutual fund term. One thing you must note here is that both short-term and long-term capital gains are taxed as per the applicable rate under the revised law. In pension plans, the annuity income generated is also taxed as per the applicable rate. However, the tax on capital gains tends to be lower than the tax on annuity income or salary income. Considering this, mutual funds could be beneficial for you in the long run.
You may consider investing in both options if that is your requirement. For instance, you may invest Rs.5,000 in a pension plan and the remaining Rs.5,000 in mutual funds. At maturity, you can use the proceeds from the mutual fund to buy a pension plan. As your income increases over the period of time, you can increase the investments allocated to various funds and pension plans.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
The newly formed government by Prime Minister Narendra Modi in its latest cabinet meeting cleared the new pension scheme for traders and shopkeepers. The new pension scheme promises a pension of Rs.3,000 to all retail traders, shopkeepers, and self-employed people after they attain the age of 60 years.
This decision taken by Modi is likely to help more than 3 crore shopkeepers and traders in India.
Due to this decision, another five crore traders are expected to become a member of the pension scheme in times to come.
All the shopkeepers and traders with a GST turnover of less than Rs.1.5 crore and aged from 18 years and 40 years can become a part of this pension scheme.
10 June 2019
The Central Board of Direct Taxes (CBDT) has been requested by the Pension Fund Regulatory and Development Authority (PFRDA) to increase the National Pension System (NPS) contribution of companies and state governments to 14%. This would be in-line to the Central Government’s contribution. The Central Government’s contribution was increased from 10% to 14% in April 2019.
Supratim Bandopadhyay, the whole-time member of the PFRDA, said that the move will be a win-win for both parties as it can be accounted as a business expenditure by employers and employees will be eligible for a tax break. He further added that there is a target of 65 lakh to 75 lakh new subscribers to join the scheme in the coming year. The PFRDA has also requested that the tax benefits be increased to 60% of the amount that is available at the time of maturity. Currently, tax benefits are provided to 40% of the corpus that is available at maturity. The new Modi government is expected to announce its first budget on 5 July 2019. Other recommendations that have been made is to increase the upper limit of Atal Pension Yojana (APY) from 40 years to 50 years and increase the monthly slab from Rs.5,000 to Rs.10,000.
6 June 2019
The government-operated steel manufacturer, Steel Authority of India Ltd. (SAIL), has introduced a new pension scheme which will be applicable to current as well as former employees of the organisation. As per guidelines issued by the Department of Public Enterprises (DPE) and the approval of the scheme by the Ministry of Steel, the scheme will be offered to all eligible employees of SAIL.
As per a report, executive employees of SAIL who were on rolls of the organisation on or after 1 January 2007 and non-executive employees of SAIL who were on rolls on or after 1 January 2012, will be eligible for the pension scheme. In a statement, it was said that the trust deed for the scheme was signed by selected trustees of the Workers’ Unions, SAIL Management, and Officers’ Associations, making the creation of the SAIL Pension Trust formal. Over 55,000 former employees of SAIL will be covered under the scheme.
27 May 2019
The BJP government in Tripura has decided to continue with the pension schemes introduced in the state by the former Left Front government. There are about 33 pension schemes currently available in the state, and they benefit over 4 lakh people. It is estimated that about Rs.26.78 crore is being spent every year in this scheme. Among these plans, three are sponsored by the Central Government.
Santana Chakma, Tripura’s Minister for Social Welfare and Social Education, stated this in response to rumours that the existing pension schemes will be cancelled by the government.
The previous government has introduced various pension schemes ranging from Rs.600 to Rs.2,500 per month for people belonging to the weaker sections of the society. The minister also noted that state-wide verification of the beneficiaries is being undertaken now and eligible beneficiaries would not be removed from any scheme.
20 February 2019
The government has introduced a new scheme called the ‘Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM) scheme to provide pension benefit to informal workers in the country. Under this scheme, a monthly pension of Rs.3,000 can be availed in the 3.13 lakh Common Service Centres (CSCs) located in different parts of the country. Various informal workers including street vendors, construction workers, agricultural workers, domestic workers, rickshaw pullers, etc. can benefit from this scheme.
Though this scheme is offered for all informal workers, it is not available for those who are already registered in various schemes like National Pension Scheme (NPS), Employees’ Provident Fund scheme, and Employees’ State Insurance Corp scheme.
To enroll in this scheme, informal workers can visit the nearest CSC with their Aadhaar and savings bank/Jandhan account passbook to register themselves under this scheme. Monthly contribution for this scheme starts from Rs.55, and it is likely to increase with the age of the individual. The government will also provide matching contribution in the individual’s account.
20 February 2019
Finance Minister, Piyush Goyal, announced the interim budget for FY2019 on Friday in Lok Sabha. While the relief provided to the individual taxpayers is a highlight of the budget, the pension plan introduced for the unorganized sector is expected to aid many families. The mega pension scheme named ‘Pradhan Mantri Shram Yogi Mandhan’ is basically introduced for individuals in the unorganized sector. Therefore, small and medium farmers will benefit from the scheme after 60 years of age. The contribution towards this scheme is Rs.100 p.m. The pension that will be provided after the individual crosses 60 years will be equal to Rs.3,000 per month. A sum total of Rs.500 crore has been allocated for this scheme and more funds will be added if need be. The scheme has been planned to be implemented in the current year.
4 February 2019
In what was considered the budget for the middle-class population in the country, the Government of India has rolled out a host of benefits through the latest Union Budget. On February 1, 2019, the Government announced that the tax-free gratuity limit will be increased to Rs.30 lakh from the limit of Rs.20 lakh that was set last Union Budget. Just last year, the Government of India doubled the gratuity limit to Rs.20 lakh. This means, the employer and employee will not be taxed if the gratuity payout is less than Rs.30 lakh and this will prove to be a boost for the middle-class population in the country. In addition, the Government of India has assured a pension income for members from unorganised sector of Rs.3,000 per month when the candidate reached the age of retirement. The member will have to make a contribution of Rs.100 per month towards his/her retirement fund and an additional Rs.100 will be contributed by the Government on their behalf. According to Financial Minister Piyush Goyal, the scheme will benefit 10 crore workers and becomes the largest pension scheme in the world.
4 February 2019
The reigning NDA government is reportedly working on a new gratuity calculation plan to provide relief to individuals employed in the private sector. According to certain sources, the government is planning to reduce the gratuity eligibility time from five years to three years. It is reported that the Ministry of Labour has asked for feedback on this subject from various industry bodies in the country.
Labour Unions in the country have already been demanding a reduction in gratuity time limit. The government is also reportedly planning to extend gratuity benefits to contractual employees working for the central government. Once approved, this decision is likely to benefit millions of employees working in the government and private sector.
Gratuity is a mandatory benefit offered by employers to reward the loyalty of their employees. As per the Payment of Gratuity Act of 1972, employees must be provided a monetary reward in exchange for their long-service in an organisation.
16 November 2018
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
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
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