How to Choose the Best Pension Plan in India

In India, most people place the retirement planning at the third position, in their priority list, after their children’s education and marriage. There is no problem with it provided you are absolutely sure that you will be able to accumulate enough money by the time you retire so that you can sustain your entire post-employment years with that. But if you are not confident about it, it is better to start planning for retirement as early as possible.

A proper retirement planning is the key to a happy post-retirement life. A robust financial planning is needed for that. However, retirement planning has become easier these days as more and more insurance companies have started introducing their retirement plans. These plans are also known as pension plans or annuity plans. Though retirement plans offered by different companies come with different features and benefits, but the main goal of every retirement plan is to take care of your and your family’s financial interests after your retirement. Pension plans make sure that there is always a regular stream of income for you even after your retirement.

Now that most insurance companies in India have come up with a number of retirement plans that promise to meet the various needs of the customers, it may seem somewhat difficult to decide which one would be the right plan for you. But it is not so difficult as you think. A little thought and comparison is all you need to do to choose the right plan for you.

Firstly, let us introduce to you the different type of pension plans available in the market these days.

1. Deferred Annuity Plan: A deferred annuity plan is rather the most common type of retirement plans in Indian Insurance market. In a deferred Annuity plan there is a fixed accumulation period throughout which you have to pay your premiums regularly. As soon as this accumulation period is over and your policy matures, you start receiving annuities in a regular basis.
2. Immediate Annuity plan: Immediate annuity plan is more popular among people who have already retired or on the verge of their retirement. In an immediate annuity plan, you start receiving annuities right after you pay your one-time premium (i.e. the purchase price). It is ideal for those who do not have much time in hand before retirement. So the quick solution for them is to buy an immediate annuity plan and start receiving annuities for life.
3. With or without profit pension plans: With-profit pension plans are basically participating insurance plans that participate in the profits of the insurance company. Hence participating plans promise to offer you the accrued bonuses additionally along with the sum assured. Without-profit pension plans, on the other hand, are non-participating pension plans that do not take part in the profits of the company hence additional bonus is paid out at the end of the policy.
4. With or without life cover plans: Life coverage is an important component of an insurance plan. While most pension plans offer guaranteed life cover on the unfortunate death of the annuitant, there are some retirement plans that promise life coverage. Some pension plans promise to return the premiums paid in case of the premature death of the policy holder. In an immediate annuity plan, for instance, the full purchase price is paid back to the nominee of the deceased annuitant.
5. Annuity certain and life Annuity plans: In an Annuity certain plan, the policy holder pre-sets the number of years he or she will be receiving the annuity for. If he or she unfortunately dies within this period of time, the beneficiary will receive the remaining annuities. In a life annuity plan, the annuitant enjoys annuities for life. Life annuity pension plans guarantee that the policy holder will receive annuities as long as he or she lives. Moreover, if you include your spouse under this policy, your spouse will receive the annuities for life after your demise.

The above are the five major types of retirement plans available in the market. Now that you understand the distinction between the types, retirement planning will be easier for you. It will also help you decide what type of plan you require. The final step would be to research and compare among various pension plans from different insurance companies. Nowadays, this can be done easily with the help of online insurance aggregators. After your research and based on your financial goals and requirements you must choose the best plan that meets all your needs.

Archana Singh is a Finance Advisor and Investment Planner. She Also does like to share finance and insurance related write ups on the web. Follow Archana on her social networking sites to know more about her.