Pension plans are retirement schemes designed to ensure financial security during the post-retirement phase of your life. These insurance plans are tailored to cater to your needs and desires after retirement. Investing in these plans offers financial independence and comfort during your golden years. Factors such as living expenses, rising medical costs, inflation, etc., underscore the necessity of having a retirement or pension plan in place.
Benefits and Features of Pension Plans:
Increased Life Expectancy: With a longer life expectancy, retired individuals face an extended period without a steady income. Investing in life insurance plans guarantees a stable pension income, ensuring financial independence and security. This pension income covers essential expenses, and certain plans even allow increased premium contributions to maximize post-retirement financial security.
: Early investment in a pension plan
generates high returns. Compounding refers to the accumulation of returns when earned interest is reinvested for maximum gains. Compounded investments lead to a substantial retirement corpus, benefiting the investor. Early investment in such pension plans ensures returns that counteract the future effects of inflation.
Financial Safety Net: Pension plans provide regular income to cover day-to-day and unforeseen expenses. Some plans offer lump-sum payouts for families in the absence of any income earner. These plans also cover unexpected medical or emergency costs. Certain plans allow customization of payment terms and annuity payment frequencies.
Tax Benefits: Under Section 80CCC, a deduction of up to INR 1.5 lakh of premium payment is allowed towards specific pension funds. Government employees enjoy a complete exemption of pension under Section 10(10A). Non-government employees receive an exemption of commuted pension under the same section. For employees receiving a gratuity, one-third of commuted pension is exempt. Those not receiving gratuity have half of the commuted pension exempt.
Flexible Vesting Period and Age: Vesting signifies when the investor starts receiving pension payouts. Immediate or deferred vesting options are available based on financial needs. Pension plans allow the selection of age at which pension payments begin. This age, known as the vesting age, can be chosen to align with financial requirements.
Insurance Coverage: Pension plans often include insurance coverage without an additional premium cost. This safeguards one against financial emergencies and unforeseen circumstances. The policy can be augmented with additional riders for added protection against incapacitating accidents or terminal illnesses.
Factors to Consider Before Purchasing a Pension Plan for a Secure Retirement:
Financial advisors recommend early investment in pension plans for optimal returns. Factors like assured regular income, contingency expenses, and planned financial needs should be evaluated prior to purchasing a pension plan. Selecting an appropriate retirement plan involves estimating expenses, gauging financial risk capacity, and defining retirement goals. Opting for a high-return-yielding, flexible, and rewarding pension plan is vital to securing your post-retirement financial future.