Pension Plans
What is a Pension Plan?
It is an investment plan offered by life insurance companies to help create retirement funds. The plan provides a pre-specified and regular pension, preventing financial shortfalls in post-employment years.
How do Pension Plan work for an Individual?
Suppose you are 35 years old and plan to retire at 60 years of age. You estimate is that you will need ₹ 45,000/- per month to maintain your lifestyle post-retirement.
Accordingly, you will need to build a fund within the next 25 years that generates a monthly income of ₹ 45,000/-. This creation of a fund is what a pension plan’s role is: You put in a fixed sum regularly, and your capital grows through investments.
At retirement, you can withdraw a specific percentage of the accumulated funds. The remaining fund generates a fixed, regular income for you during your retirement years.
Types of Pension Plans
ULIP Investments
ULIPs offer opportunities to tackle inflation and get good returns through capital market investments. These plans are suitable for creating significant retirement funds in a systematic manner. You can select your ULIP's fund types as per your capacity to bear risk and market fluctuations
Deferred Annuity Pension Plans
Through these plans, you can deposit a lump sum amount or invest systematically in regular intervals to help your money to grow. The pension from your deposits is ‘deferred’ i.e., the payout starts a few years after you purchase the plan. These plans are ideal if you are a few years away from retirement.
Immediate Annuity Pension Plans
Through these plans, you pay a lump sum premium and start getting income immediately. The pension amount decided when you buy the annuity remains unchanged throughout your life.