Life and General Insurance

Pension plans also known as retirement plans are investment plans that let you allocate part of savings to accumulate over a period of time and provide you with steady income after retirement. As an Individual bread earner of your family you can only work for as long; at some point your income may cease to exist and hence the need to secure your retirement lifestyle. Pension Plans let you divert a part of your current income to cover your post retirement living. With the ever increasing rise in cost of living, it has become imperative that one should make arrangements for living a comfortable retired life.

 

Pension Plans are Individual Plans that gaze into your future and foresee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future

 

 

The following options are available under the plan

Type of Annuity:

• Annuity payable for life at a uniform rate.

• Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive.

• Annuity for life with return of purchase price on death of the annuitant.

• Annuity payable for life increasing at a simple rate of 3% p.a.

• Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.

• Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.

• Annuity for life with a provision of 100% of the annuity payable to spouse during his/ her life time on death of annuitant. The purchase price will be returned on the death of last survivor.

 

Types of Retirement Plans

 

Deferred Annuity: A deferred annuity plan allows you to accumulate a corpus through regular premiums or single premium over a policy term. After the policy term is over, pension will begin. The advantages of deferred annuity plans are immense and these include tax benefits that are associated with this plan. No tax is levied on the money that an individual invests in the plan unless he withdraws it. As deferred annuity plan can be bought by making one-time payment or by making regular contributions towards it, therefore, the plan suits to all types of investors: those who want to invest systematically and those who have a chunk of money to invest.

 

Immediate Annuity: In an immediate annuity plan, pension begins immediately. One has to deposit a lump sum amount and pension will start instantly Based on the lump-sum amount, the policyholder will invest at prevailing annuity rates. You can choose your annuity from different annuity payout options. Moreover, you can enjoy tax benefits on the premiums paid as per Indian Income Tax Rules. After the death of a policyholder, his nominee will be entitled to get money.

 

With Cover and Without Cover Pension Plans: The "with cover" pension plans have life cover component in the plan. This implies that on the death of the policyholder, a lump sum amount is paid to the family members. However, the cover amount is not very high since a large part of premium is diverted towards growing the corpus rather than covering for life risk. The "without cover" pension plan implies that there is no life cover. The corpus built till date (after deducting unpaid premium and other expenses) is given out to the nominee in case of the death of a policyholder. Presently, deferred annuity plans are "with cover" and immediate annuity plans are "without cover".

 

Annuity Certain: As per this clause, annuity is paid to the annuitant for specific number of years. The annuitant can choose the period and if he dies before exhausting all payments, annuity will be paid to beneficiary.

 

Guaranteed Period Annuity: As per this annuity option, annuity is given to the life assured for certain periods like 5,10,15 or 20 years, whether or not he survives that duration. 

 

Life Annuity: As per this annuity option, pension amount will be paid to the annuitant until death. If annuitant chooses "with spouse" option, after the death of annuitant, pension will be paid to the spouse.

 

National Pension Scheme (NPS): New Pension scheme has been introduced by the government for people looking to build up pension amount. You can put savings in new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of amount at retirement and rest 40% must be used to purchase annuity. The maturity amount is not tax free.

Pension Funds: Owing to the low front load charges, pension funds are a good way to accumulate corpus amount. Pension funds are meant for long term and hence, they perform better.