All About a Pension Plan

The standard age of retirement which used to be within the range of 55 to 60 years, is now decreasing as more and more individuals plan to stop regular 9 to 5 work at an early age group, and spend the later component of their life fulfilling their dreams. Retirement planning through a pension structure guarantees regular income to the policy owner in the form of annuity or pension check.

Types of Annuities or Pension Programs:

Life Annuity: It ensures the stipulated regular income to an person throughout his life. In case of loss of life of policyholder, the invested quantity is refunded to his nominee.

Guaranteed Period Annuity: It provides regular fixed income throughout an individual’s existence and also guarantees payment for a specific number of years to the nominee in case of the policyholder’s death.

Deferred Annuity: With this type of annuity the policyholder ‘defers’ or postpones the annuity up to a certain time period, hence it does not commence immediately. The premium payment options in such a policy are either regular annual premiums or a single huge premium.

Annuity Certain: In this kind of plan, a stipulated amount of annuity is paid for a fixed term (in years) irrespective of how long the policyholder lives.

Factors to be considered whilst investing in a Pension Plan:

᾿ Compare the premium in various pension strategies and then select the one that best matches your requirements.

᾿ Check whether the strategy is with cover or without cover. The former offers the sum assured to become paid to the nominee in the case of a good eventuality, while in the latter case there is absolutely no sum assured and the nominee gets only the amount net of past due premiums and expenses.

᾿ Check the performance of the various pension techniques offered by the insurer.

᾿ A traditional pension scheme invests a considerable portion of the premium in government investments (G-Secs) and bonds, thus yielding low returns.
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Comparatively, investing in an ULIP pension plan provides higher profits (if the investment in ULIP is well diversified).

᾿ Investment decision in an ULIP pension insurance policy ought to be made only after considering the various charges involved like allocation cost, fund management charge etc .

᾿ Check the charges and deductions applicable on surrendering the policy before maturity in case of emergencies.

᾿ Look for tax benefit provisions in the Pension Plan. Premium payments towards the Pension plan are eligible for refund under Section 80CCC.

There are also a few initiatives taken up by the government to market old age income security, like New Pension Scheme (NPS). It is a defined factor based pension plan. The NPS is regulated by Pension Account Regulatory and Development Authority (PFRDA).

It is important that individuals evaluate pension programs from a retirement benefit perspective plus invest at an early age. In other words, the earlier you take the step of investing in a pension check plan, the better retirement benefits you reap on maturity of the program.

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