Pension Plans
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What are pension plans?
Planning for the future financial independence seems like a major burden with the current lifestyle and upcoming expenditure. The need for securing the future after retirement when the income sources diminish heavily and you are solely dependent on your bank savings. Pension plans helps you to meet the post-retirement financial uncertainty to provide you with monthly funds to meet your needs. Even if you have ample funds, still having a secure income source will be mentally and financially securing.
Since your young age, when you start investing in pension plans, after the term end the insured person will get a steady income for a pre-decided time period to meet your financial needs along with a pre-decided lump sum amount. This will ensure your financial independence at your old-age.
Eligibility to Buy Pension Plan
Pension plans provided by insurance companies allows all residents and non-residents between the ages of 18 to 55 years to avail the benefit of this insurance.
- 1. PAN Card
- 2. Photo Identity Proof
- 3. Address Proof
- 4. Crossed Cheque of First Premium Payment or Online Transfer Availability
- 5. Date of Birth Proof
Benefits of pension plans
Pension plans are the best way to ensure income guarantee after the retirement in the old age. Along with that, as per IRDAI, the insurance companies are bound to pay a non-zero, positive returns to the policy holders. Since there is no concept of social security in India like the foreign countries it becomes a vital need to secure the future years with guaranteed income. There are certain in-depth benefits of overall pension plans.
The most variable or distinctive feature of the pension plan is its annuity. This feature allows the policy holder to choose when they wish to receive the amount. Annuity comes in two options- Immediate or deferred. Immediate annuity referred to the case where insurance providing company will start paying you the funds after receiving the premium amount in one-go. It allows the insurance company to generate more funds over the lump sum premium paid by you. In case of deferred annuity, the insurance company starts paying after a certain time period. This feature keeps you in advantage to choose the mode as per your finance and future needs.
it is the amount offered by the insurance company that is pre-defined which is offered as a death benefit or maturity cover provided by some insurance providers. It is either around 10 times of the premium paid by the policy holder or the lump sum assured of the policy depending on the type of policy bought.
The pension plans allow you the option to pay lump sum premium fund or in parts of periodic intervals. This premium investment accumulates over a longer time to provide a solid monetary framework for the Future. This is known as accumulation period when funds started accumulating since the age you start investing to the age you have decided to pay the premium. Payment period on the other hand refers to the period from when you start withdrawing the funds from the accumulated stage for usage. Companies generally offers two type of payment withdrawals- Partial or lump sum withdrawal during the accumulation stage itself to meet sudden monetary needs or to get periodic payments after retirement for the certain years.
This is the feature based only on insurance based plans where the insurance company pay a certain amount to the policyholder if they decide to surrender the plan before maturity, only if they have paid the premiums for the minimum required period. Although, when the policy holder prematurely surrender their policy they loss all the added benefits including the life cover features provided by the companies.
Critical times need critical measures to take and everything comes at the finances at the end. To meet those critical needs, riders help to add additional benefits to the already prevailing policy benefits.
Younger age benefits tremendously to you if you are planning for long-term investment. As younger body is less likely to acquire any major diseases or impact of any accidents as they are immune and have strength to fight back. That’s why premium at young age is comparatively lower than as the age increases.
This top-up provides the benefit of getting lump sum amount which is generally equal to the rider sum assured to the policy holder in case if they acquire any kind of critical illness.
It is mostly similar to the term life insurance where the nominee will get the benefit of sum assured if the policy holder dies during the term of the life insurance, before maturity. Since, this is just a top-up plan, so the premium for this rider is generally low as compared to the term life insurance but in this case insurance companies restrict the upper limit of the maximum sum assured that can be availed.
In case of Accidental death of the policy holder then the top-up/rider sum assured will be provided to the nominee mentioned by the policy holder. This rider sum assured is the additional fund provided over the sum assured mentioned in your base policy.
In case the policy holder is unable to pay the further premiums due to any critical illness or physical injury, this rider will provide a wave off of the premiums until the policy holder is able to continue with the premiums. In case the policy holder dies during the policy term then also the policy remains in force if the auto cover period is going on. Even the payments of the auto cover period will also waive off. Auto cover premium is the period of 2 years for which policy continues even if the insurer will not be able to pay the premium. This happens only when the full premium for the policy has already been paid for two years.
This rider allows you a daily part payment of hospital expenses if the policy holder has to suddenly hospitalize due any unrecognized sickness, injury or critical illness. This rider will get activated only if the insured in the hospital for more than 2 or 3 days. The expense could be paid as a percentage charge of room in hospital or to meet daily hospital expenditure, whichever is low. The insurance providers has set a certain limit to avail this benefit and this benefit will get activated after 2 or 3 months of activation of policy.
Types of pension plans
Everyone has different needs, expectations and requirements. So, one plan can't satisfy everyone's needs. That's why the insurance companies provide a multitude of pension plans to customers to check the features and select the one they feel is best as per their requirements.
- Life annuity pension plansThis plan offers life annuity to the policyholder until the death of the concerned person the policy continues and later on the annuity will be provided to the spouse. This is the most benefitting plan if you want the financial security of your family, or spouse in the old age after your demise.
- Without cover pension plansThis plan is beneficial if you already have a life cover. As most insurance providers offer plans that are based on immediate annuity without life cover. In this case, the nominee will receive the funds collected via premium after the demise of the policyholder.
- With cover pension plansThis plan is just like the term insurance plan where the sum assured is offered if the policyholder dies before the term end of the policy. Usually, the accumulated premiums are used for generating corpus for the pension funds. Currently, insurance companies provide life cover with a deferred annuity. So these pension plans are the best substitute for term insurance as it is cheaper to invest in these and saves a lot of money.
- Deferred Annuity Pension PlanJust like the normally deferred annuity, the returns are not provided in lump sums but parts. Policyholders can pay the premium in a lump sum or parts as per their choice and can accumulate ample funds. This is known as the accumulation period and the return payout will be in periodic parts. This type of investment is preferred by the types of investors who believe in systematic savings and the ones who can afford a single lump sum investment.
- Annuity certain pension planThis pension plan allows the return payout or annuity for the certain, pre-described years to the policyholder. If the policyholder dies before or during the annuity period then the returns are provided to the children or grandchildren whoever is selected as the beneficiary.
- Guaranteed period annuity pension plansGuaranteed period as the name suggests, the insurance company provides the returns for a certain no. of years that will be defined by insurance company. Later on the policy holder can choose from that limit. Generally it ranges from 10, 15 to 20 yrs. Even if the policy holder dies during the period, the annuity will be provided for the decided period.
- Immediate annuity pension planThis plans offers an immediate starting of the annuity when the policy holder submits the one time premium of the policy. For this, lump sum amount of premium is required to provide the benefit of immediate returns. In case the policy holder dies, then the annuity will be provided to the nominee for the pre-decided period.
- National Pension SchemeThis plan is government organized that allows you an opportunity to invest your savings in equity or debts and the maturity amount will be provided to the policy holder. If the policy holder wishes, then they can withdraw 60% of their maturity amount but the minimum of 40% of the amount should be left for the annuity
Factors affecting returns in pension plans
Just like there are some factors that impact the buying process mainly the premium amount of the pension policy likewise there are certain factors which should be kept in mind while that impact the return generation of the pension plans.
- Annuity chosen- As per the type of annuity chosen, your pension withdrawal is dependent on. There are two types of annuity. Deferred annuity allows you the withdrawal of return funds in periodic parts as per the requirements whereas the immediate annuity allows quick withdrawal after the lump sum premium payment.
- Market risks- The policies whose functioning is based on the debt or equity market involve market risk that impacts the return. Also the performance of financial market equally affects the returns. Such as ULIP pension plan is based on the market so its return varies as per the market trends. If the market favors as per your planned investment then the returns would be higher.
- Period of investment and withdrawal- The period of investment is directly linked to the amount of returns. The longer is the period of investment, the higher will be the returns. In case of any need in the midst of the policy, then the company allows you the withdrawal limit of 1/3rd amount of the corpus. For instance, if you are collecting Rs 100000 for the retirement plan then you can withdraw around Rs 30000 for your immediate need.
- Early Retirement- Retirement is totally bound on your preference of what you want and when you want. Retirement plans should not be a burden on you if you start from the early age, then the little amount of premiums can help you generate significant amount of retirement funds. Investment from the early age of your career life will ensure easy and comfortable retirement life after 60s.
- Managing credits- Even though you are diligently forming a good foundation for your retirement funds, but added or prolonged debts at the time of retirement will cost you high-interest payments and that would ultimately limit your cash flow.
- Taxes on premiums and returns- Although the Indian Government, U/S 80C allows the tax benefit to the premium paid and returns but it should be noted that not all the premium paid and return payouts are tax exempted. For instance, Income like interest earned is taxable income and generally taxed at normal income tax rates.
Tips to invest in pension plans
Pension plans are the substantial income source of your future which you have carefully invest today. For getting the significant returns on your investment it is important to make right choices now.
- Early Beginnings- Starting early provides you ample of saving opportunities and provides your finances the time to substantially grow to deliver the hefty outputs. Since the Pension plans are calculated on the basis of compound interest then the time period matters a lot. The longer the funds will stay invested; the better will be the returns. Moreover, the volatility of the financial market becomes unimportant over the years of time period for which the pension funds stay invested. So, the returns will surely get multiplied by the end of the period.
- Small InvestmentsInvesting doesn’t have any right or fixed time. The sooner you start, the lesser will be the premiums or the impact of market will be nullified. The amount of premium doesn’t matter when you are investing for a substantially longer duration but what matters the most is the disciplined and routine savings that will help you to generate the exemplary returns in the future.
How we help?
The hassle of selecting and ultimately buying a pension plan is troublesome for most of the people. But we make this process quick and simple for you.
- Ease to Access- With easy sectioning of data with quick and user-friendliness of the website makes the access to all the information easily accessible to the users. With our expert advices and thoroughly researched data which is presented in simple and clear format allows you to take quick and well-informed decisions.
- Claim Assistance- Our dedicated team is not only limited to just the first half of buying process but we are with you at your every step to provide you the guidance or assistance you need at any step from policy buying to applying for claim
- No unbounded formalities- The ease of access and user friendliness breaks the common perception of buying and getting claims of pension policies being a huge task. With our quick and simplified data representation, form filling has become an activity of mere seconds. Even the language is highly simplified that can be easily understandable by all. With the experts, you can take assistance anytime from anywhere. We are just a call away.
Procedure to buy pension plans online
Buying pension plans and understanding their terms and policies has now become an easy task which can be done within a few clicks. To buy the pension plans online, just follow these steps.
- 1. Login in to our website or insurer’s website directly.
- 2. Read through the various available plans and make a note of the ones you might be interested in.
- 3. Choose the sum assured/coverage amount that you need.
- 4. Choose the top-ups/riders as per your requirements.
- 5. Fill the required information such as personal details and other relevant information.
- 6. Calculate the final premium. It is based on the policy chosen and the premium as per the age and any rider selected.
- 7. Pay the premium via available online payment methods.
- 8. The pension plan will auto-generate after the payment and you will receive a copy on your mentioned email id and hard copy will be sent to you via post.