Pension plans provide you financial security so that when your professional income starts to decrease, you can still live your life with pride without bargaining on your living standards. Pension plans are kind of tool in which you can invest regularly during your work life, and get return of your investment in lump sum at your retirement.
In India, people do not get any social security like other countries. So, it is very important for Indian people to have pension plans to meet any contingencies in the future. By doing this, your resistance power will be enhanced after the retirement. There are factors which should be considered while planning for the retirement and pension like your medical cost, corpus you require and your income.
What Is Pension?
A pension is a tax efficient way to save money which you can use later in life. Pension can provide income at the time of your retirement. The government also contributes to your pension by providing you tax relief. You get number of options for how you choose to take your pension income once you are retired.
How Do Pension Plan Works?
In pension plan, you are required to pay premiums at regular intervals and get corpus of funds for retirement. However, the premiums are collected in asset or fund of your choice, which generally lasts for a pre-determined period. After the plan reaches to the maturity stage, you will get the pension benefits which can be utilized by withdrawing the whole amount or partially withdraw the pension benefits.
Moreover, the policyholder also can choose to discontinue the pension plan, but the policyholder may have to pay cancellation charges. It is recommended not to surrender a pension plan before the due date, or you will not receive all benefits.
Benefits of Pension Plans
In today’s stressful life, we barely get time for future planning and think about retirement. However, it is important to understand current and future expenses based on your lifestyle and start investing in pension plans.
There are many benefits of investing in pension plans, here are the top 5 reasons why Pension plans are important for a secure future.
- It is an affordable and safe way for retirement planning.
- It provides guaranteed income after your retirement which can cover your financial needs.
- It provides protection to your family as well as savings for your retirement.
- You have options to invest in market-linked pension plans or stick with a conventional plan.
- It also provides death benefit which is payable in case of death of the policyholder.
You can start by saving smaller amount in senior citizen pension scheme and get cover for unexpected expenses at the time of your retirement. Thus, investing in the pension plans is the safe and secured way to make sure you are financially secured during your senior years.
Types of Pension Plans
When you search for the best pension plans in India, you will find several of pension schemes. Here are few of them which can help you to make well-informed decision.
NPS – The National Pension Scheme
The national pension scheme is one of the varieties of pension scheme which is offered by government of India. If you invest in NPS, you can save at regular intervals in your pension account, which will be paid out when you get retired.
Annuity Plans
In annuity plan, you have to pay lump sim amount and instantly start receiving monthly or annual annuity. The annual or monthly annuity is only paid out after a particular term. The annuity payment is either for a fixed period or for a lifetime.
Life Annuity
If the policyholder passes away when the pension plan is active, the spouse of policyholder will be entitled to the pension pay-out.
Pension Plans with Life Cover
In this type of pension plans, Life insurance and investment both are included. It makes sure that if the policyholder dies, the family of policyholder will receive a lump sum pay-out.
Impact of Retirement Planning on Your Future
Retirement planning is like any other financial planning which should be done ahead of time. Investing in the retirement plans is essential to financially secured your golden years. The best retirement plans are often begun at a young age. This implies that retirement preparation can take place at various stages of life. You can live a stress-free life at your senior years by starting investing in retirement plans in early age.
The retirement plans help you to grow your savings and provide regular income for life. It also supports you to set aside some funds towards your retirement while you are still working.
Conclusion
It is always recommended to start investing in pension plans as soon as possible. The main reason for it is that the faster you start investing, the more time you will have to create a corpus of money.