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Types of Pension Plans in India

Know how to choose the best type of pension plan.

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At a younger age, most of us do not think of retirement planning as a financial priority. But, as you approach the age of retirement, you may find yourself hurrying to save enough money for it. It is in your best interest to create an efficient financial plan today by finding the type of pension plan suitable to you.

Types of Pension Plans 

Understanding different types of pension plans available in the market is a critical step when you begin making retirement plans. It provides a closer look into how a particular type of pension scheme can benefit you, in particular. It also gives you the necessary tools to envision life after retirement.

Your financial requirements are likely to transform in the future due to an array of reasons. Primarily, the loss of an income source is the most concerning thing about retirement for most people. Finding the right type of pension plan can ease your worries considerably.

Here are some of the common types of pension plans in India:

1. Deferred Annuity 

The deferred annuity type of pension plan lets the policyholders receive annuity on a later date  through single or regular premium payments. Over the course of the policy, they can save a substantial amount of money to be received as a pension. You can also avail of tax benefits with this type of pension plan.   

Also Read: What is Annuity?

2. Immediate Annuity 

Under the immediate annuity type of pension, you deposit a lump sum amount and receive the annuities straightaway. It is up to you to choose from the range of annuity options and the amount to invest. In case of an unfortunate incident, the nominee is entitled to receive the benefits. 

3. Annuity Certain/Guaranteed Period Annuity 

In this type of pension plan, the policyholder receives the annuity for a specific number of years. They can choose the period of payment at their convenience. The nominee of this type of pension plan receives the payments in case of the insured's demise. 

4. National Pension Scheme (NPS)

The Government of India provides different types of pension plans for the retired population. It is also an opportunity for central and state government employees, except armed forces, to save for retirement. With this type of pension plan, the employees can invest at regular intervals in their pension account, which will be payable post retirement.

Know More: National Pension Scheme

5. Pension Plans with Life Cover 

The pension plans include life cover as well as an investment component. It means that the family members will receive a lump-sum payment upon the policyholder's demise. 

4. National Pension Scheme (NPS)

The Government of India provides different types of pension plans for the retired population. It is also an opportunity for central and state government employees, except armed forces, to save for retirement. With this type of pension plan, the employees can invest at regular intervals in their pension account, which will be payable post retirement.

Know More: National Pension Scheme

5. Pension Plans with Life Cover 

The pension plans include life cover as well as an investment component. It means that the family members will receive a lump-sum payment upon the policyholder's demise. 

               

However, it is essential to note that the insurance benefit amount may not be substantial with this type of pension plan. 

Pension Plans from Max Life Insurance 

Max Life Insurance aims to provide retirement plans to people with diverse financial requirements. You can select the type of pension plan that can optimize the benefits and ensure a comfortable life after retirement.

Let's discuss the different types of pension plans we offer.

1. Max Life Forever Young Pension Plan

With Max Life Forever Young Pension Plan (UIN - 104L075V03; A Unit-Linked Non-Participating Individual Pension Plan), you can secure a substantial retirement fund and choose the retirement age when you wish to receive the pension. There is also a partner care rider available to extend the benefits to your spouse.

You can also grow the savings in the retirement fund with this type of pension plan. The loyalty benefits add to the fund value at periodic intervals.

2. Max Life Guaranteed Lifetime Income Plan

Let's discuss the different types of pension plans we offer.

1. Max Life Forever Young Pension Plan

With Max Life Forever Young Pension Plan (UIN - 104L075V03; A Unit-Linked Non-Participating Individual Pension Plan), you can secure a substantial retirement fund and choose the retirement age when you wish to receive the pension. There is also a partner care rider available to extend the benefits to your spouse.

You can also grow the savings in the retirement fund with this type of pension plan. The loyalty benefits add to the fund value at periodic intervals.

2. Max Life Guaranteed Lifetime Income Plan


When you are not employed anymore, a guaranteed income source can make all the difference. Max Life Guaranteed Lifetime Income Plan (UIN – 104N076V11 ; Non-Linked Non-Participating Individual General Annuity Savings Plan) will ensure that you meet your financial needs independently throughout your life. This type of pension plan comes with the flexibility to choose annuity and pay-out options.

There are multiple immediate and deferred annuity options for the policyholder to customize their retirement  income. You can choose to receive the pay-out on a yearly, half-yearly, quarterly, or monthly basis.  

3. Max Life Perfect Partner Super

Max Life Perfect Partner Super (UIN - 104N077V03; A Non Linked Participating Individual Life Insurance Savings Plan) is exclusively designed to give your spouse financial protection against unforeseen events after retirement. You can also opt for a waiver of premium rider to this type of pension plan and relieve the burden of paying premiums in case of an eventuality.

Furthermore, there are bonus additions available with this type of pension plan. You can receive the accrued paid-up additions  and terminal bonus, if any, at the end of the policy term.

How to Buy Pension Plans in India? 

The investments that you make today to plan for retirement are the ones that will sustain you in the future. As per a study[1] conducted to understand the retirement needs of people, 58 percent of the people wish they had started saving for retirement earlier in life.  

The ever-increasing cost of living is why you need to get ahead of your retirement plans in time. As you begin planning for your retirement, it is important to be aware of the different types of pension plans in India to make an informed decision.

Here are some of the critical things to remember when finding the right type of pension scheme:

1. Evaluate Expenses

All hard-working individuals have to manage their expenses carefully to fulfill several responsibilities in life. It can be challenging to visualize how your life will look after retirement in terms of money. So, find the right type of pension plan by mapping the timeline of significant life expenses.

Take the time to determine the possible changes in your responsibilities in a few years. It will help assess the needs of your financial dependents in alignment with your personal goals for post-retirement life. 

1. Evaluate Expenses

All hard-working individuals have to manage their expenses carefully to fulfill several responsibilities in life. It can be challenging to visualize how your life will look after retirement in terms of money. So, find the right type of pension plan by mapping the timeline of significant life expenses.

Take the time to determine the possible changes in your responsibilities in a few years. It will help assess the needs of your financial dependents in alignment with your personal goals for post-retirement life. 

2. Assess Financial Situation

The type of pension plan that can benefit you the most is heavily dependent on your current and future financial situation. If you have any debts or significant expenses in the future, consider if they will be present after retirement as well.

Consequently, you can arrive at the amount of investment in a particular type of pension plan to meet these needs.

3. Compare Policies

An essential step in identifying the ideal type of pension plan is to compare different policies. Thorough comparison will give you a better perspective on your requirements and how they can be fulfilled efficiently. Going through the different types of pension plan features may uncover a need that you had not considered before.

Frequently Asked Questions (FAQs) 

Q. What is Annuity in Pension Plan? 

A. The regular pay-outs that you receive as a pension after retirement is known as an annuity. You have options to choose the frequency of annuity payment as per your convenience.

Q. Are There Any Tax Benefits on the Different Types of Pension Plans in India? 

A. You can get tax  deductions under Section 80CCC of the Income Tax Act, 1961 for the premium paid for the renewal of an existing policy or purchasing a new pension policy. While  the maturity amount is exempt from taxation,  the rest is paid as an annuity, which is subject to taxes as per the Indian government. 

Q.  When Should I Buy a Retirement Plan?

A. The right time to purchase a pension plan depends on your specific situation. With the increase in life expectancy and people seeking early retirement, retirement duration has increased to 30-35 years.

Several factors, such as changing lifestyle and inflation rates, make it essential to start investing early in life. Even if you start small, investing early in a pension plan gives ample time to build a sizeable corpus

Q. How Much Should I Invest in a Pension Plan? 

A. The amount of investment depends on personal factors such as standard of living, needs of financial dependents, etc. You can calculate the required amount considering these factors to arrive at an adequate sum.

Q. If I Have A PF Account, Do I Still Need a Retirement Plan?

A. While a PF is valuable, it may not be sufficient to cater to your needs after retirement, considering growing medical expenses, inflation, and cost of living. It can help to use a retirement calculator to better understand the financial requirement and find the right type of pension plan accordingly. 

Sources:

[1] https://www.soa.org/globalassets/assets/files/resources/research-report/2018/2018-retirement-spotlight-india.pdf

https://www.india.gov.in/spotlight/national-pension-system-retirement-plan-all

https://pensionersportal.gov.in/index.asp

https://www.soa.org/globalassets/assets/files/resources/research-report/2018/2018-retirement-spotlight-india.pdf

ARN NO. Dec21/Bg/02B