Retirement

What is Pension Plan?

retirement plan

Pension plans, also known as retirement plans helps an individual to secure his/her future. It is a process in which an individual invests some of his income towards retirement benefits. It helps an individual to safeguard his/her post-retirement life and also let an individual live financially independent.

IMPORTANCE OF PENSION PLANS

Pension plans helps an individual to get a fixed and a regular income after getting retired. The amount of pension depends on the amount invested i.e. more the amount, more is the pension. Also, they are liable to get tax benefits under section 80C to the extent of ₹150,000. Section 80C, 80CCC, 10(10D) and 80CCD are the various sections which allow exemption under the Income Tax Act, 1961. There are also companies which allow you to withdraw the funds in case of an emergency or shortage. When a person retires, he/she will face a decrease in income, but in that case, pension plans help to be a regular source of income.

This will help to maintain same lifestyle and cope up with other expenses too. Additionally, there are other features/advantages you may receive on your Pension Plan and that totally depends on the brand you’re tying up with & what it brings to your table when it’s about selecting the best plan that take care of you & your family. As per the acceptability among the people of India, the most dominating plans that are available from big brands could be considered for Aditya Birla Sun Life Insurance- Monthly Income Plan

ELIGIBILITY CRITERIA FOR PENSION PLANS:

The eligibility criteria for a Pension/Retirement Plan varies company to company & depends upon the offering which a company have for its customers. However, you don’t need to worry that you would be required to meet some strict guidelines when you look forward to opt such investments. To avail such plans, a user must have an idea of his/her requirement that binds its interest in these investment & the amount which he/she wants to invest to protect its future earnings.

Being as a generic criterion, the age of the respondent defines that if any such investment can be made or not.  Your age defines that how best these investments can yield you returns and this directly depends upon how long your money get invested in a Pension plan. In major cases, people with age more than 60+ years are not being advised to go for Pension plans because of the tenure of the policy.

POLICY PERIOD:

You can select the time when you want to start getting a pension. Some pension plans keep the vesting age as minimum 40-50 years. Also, it is flexible up to 70 years of age. A few pension companies also allow it to be at 90 years of age.

If you start investing in pension plans at the age of 25 and continue it for more 25 years, then the accumulation period will be around 25 years. Some of the companies also allow partial or full withdrawals during accumulation periods.

Also Read: 5 Things to Include In Your Retirement Plan

PLAN SELECTION:

Before investing in pension plans, one must keep a few points in mind. First of all, check about the reviews and ratings of the insurance company. There are some renown Insurance companies like Aditya Birla Sun Life Insurance which is trusted by millions of users and hold a strong credibility as a brand in India as a country. It’s always recommended to Compare various policies and schemes and select the one which is the most beneficial. Most importantly, check if in the case of death of the insurer, whether the amount can be handed over to the nominee or not.

You should have proper research on the claim settlement percentage of the companies you look for and you can take a reference of Aditya Birla Sun Life Insurance for this. There are traditional pension plans available which invest some of the amount of premium in government securities and bonds, thus resulting in lower returns. So, you can go for investing in ULIP policies which yield higher returns. ULIP investing also charges some amount in the form of fund management, allocation charges, etc., so do check about these before investing.

HOW TO BUY PENSION PLANS:

In order to buy pension plans, various documents are required to be submitted. They are as follows:

  • Age proof: It requires you to submit any of the prescribed documents – Birth Certificate/ Driving License/ Passport/ 10th or 12th mark sheet/ Voter ID.
  • Identity proof: Passport/ Pan card/ Driving License/ Aadhar Card.
  • Address proof: Telephone Bill/ Electricity Bill/ Ration card/ Driving License.
  • Income Proof: This proof should mention the annual income of the person.
  • Medical tests: You need to pass medical tests as some companies do this in order to make sure if the person does not suffer from any major health problems.

About Ajeet Sharma

My Name is Ajeet Sharma Financial Blogger & Founder of Financegab.com. We are a personal finance blog dedicated to personal finance & financial planners. The main aim of this blog is to help people to informed financial decisions.
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