To lead a stress-free and financially secured life post-retirement, it is essential to plan your retirement well ahead of time. Read further to explore the features of a pension plan and the benefits it offers to help you maintain your living standards during the retirement years.
Retirement is the phase of relaxation and fun you craved all through the years of your career. But since money is essential to leading a comfortable and peaceful life where you don’t need to compromise on your self-respect, a good corpus or a regular inflow of money is necessary. That’s where the need to invest in a good pension plan arises.
Retirement or pension plans are financial instruments where you can invest a portion of your income regularly over a period to ensure a regular payout during your post-retirement years.
Let’s look into the main features of a pension plan:
Pension Plan – Features
- Accumulation Phase: The accumulation phase starts when you buy a pension plan and start investing yearly into it and continues till the term of the plan is reached.
- Vesting Phase: The vesting phase starts after the accumulation phase when the pensioner starts receiving annuities and continues until their death or death of the nominee, as per the policy terms.
- Immediate and Deferred Annuity: You start receiving the pension or the payment soon after the lumpsum premium has been paid with an immediate annuity. As per the policy terms, a scheme with deferred annuity begins the payment on a future date.
Let’s understand the benefits offered by pension plans:
Pension Plan – Benefits
- Guaranteed Income: Providing you with a regular and stable income is the prime benefit offered by a pension plan. It assures you guaranteed income post-retirement or immediately, as per the annuity of your plan.
- Long-Term Saving Option: Pension plans are saving schemes that encourage saving habits and help you accumulate wealth in the long run. The accumulated sum can be invested further or used to ensure a regular cash flow after retirement.
- Insurance Coverage: Many pension plans also offer a death benefit to the nominee in case the policyholder dies within the duration of the policy. Hence, while financially supporting you during retirement years, it also supports your loved ones in your absence by providing life insurance benefits.
- Tax Benefits: A maximum deduction of up to 1.5 lakhs incurred towards a pension plan can be claimed under section 80CCC. Both residents and NRIs can claim the deduction against expenses towards a new policy or renewal of an existing one.
There are a variety of pension plans on offer by banks, insurance companies, and other financial institutions to choose from. Study these plans in detail and understand their key benefits before choosing the right plan. For instance, the HDFC life retirement pension plans comes with attractive rates and flexible annuity options.
A Comprehensive Plan with Multiple Benefits
Retirement plans are comprehensive saving plans that must be bought as early as possible to generate an even higher corpus by the time you retire. Since you have more energy in your youth years to devote yourself to work, it is an ideal time to start saving and planning your retirement.
