What Should You Check in a Pension Plan?

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Retirement planning is vital for a financially independent and stress-free life. The most effective way to plan for retirement years is through a pension policy. It can protect your money against rising inflation and ensure a steady flow of funds during post-retirement years

There are plenty of factors to tick off before choosing a pension plan. For example, identifying time horizons, calculating after-tax sum assured, and estimating the expenses are necessary. Further, one must also check a few important features to make the best of the pension schemes in India.

Ø  Liquidity

The top Unit Linked Insurance Products (ULIPs) do not offer liquidity within the first five years. But starting at a young age is a good idea. Make sure you are still earning when you buy the best pension schemes.  This way you are less likely to withdraw or surrender the invested amount. At the end of the fifth year, one can encash in the form of annuities. This retirement corpus can help you secure your future and help fulfil short-term goals.

Ø  Vesting Age

This is when you start to receive the benefits. The best retirement plan allows you to alter the vesting age according to changing requirements. You must be able to postpone benefits if you are aged 55 years or below. The top plan will let you postpone till 70 years.

Ø  Accumulation Duration

You can choose periodic investments in retirement policy. For example, the best insurance company will let you pay the premium in a single lumpsum amount. You can also choose to pay on a yearly, half-yearly, and monthly basis. It is a good idea to start early. This can ensure a long accumulation timeline while you build your corpus through regular simple bonuses.

Ø  Payment Period

This is the time within which you will receive the income. For example, you can start getting the sum assured from 60 years till 70 years of age. So, the payment horizon is 10 years. You can use a retirement planning calculator to know the sum assured and premium payment terms beforehand. Further, get in touch with the financial experts to know the duration of the best pension plans in India for an informed choice.

Ø  Surrender Value

Regular premium policies will acquire surrender value only if at least the first 2 consecutive years’ premium has been paid in full. Single premium policies acquire surrender value immediately and can be surrendered anytime during the term of the best retirement plan in India.  You are also allowed to terminate an in-force or paid-up policy for the value.

Ø  Tax Efficiency

You could be eligible for tax benefits or exemptions as per the applicable income tax laws under Section 80C of the Income Tax Act, 1961.  This is subject to change from time to time. Tax benefits are also available under Section 10 (10D) at the time of surrender, subject to the premium not exceeding 10% of the sum assured.

A retirement planning calculator can help you make a sound choice. For more details on risk factors, terms and conditions, consider reading the sales brochure carefully.

 

 

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