Compare & Buy Best Pension Plans in India - Annuity Plan Online

An annuity is an insurance product best suited for post-retirement usage. It pays income to the policyholder. An individual needs to invest in the annuity scheme and the policy makes payments on a future date. These payments are typically determined on the length of the payment period. A Pension Plan ensures that the individual continues receiving regular income after their retirement. After toiling hard for a major part of life, a retirement is undoubtedly a well-deserved time, during which individuals should be able to enjoy life. A pension plan helps fund all post-retirement plans. Therefore, as you cross off the things listed on your bucket list, a retirement plan not only back you up financially but also gives you a financial independence. 

Why would One Need a Pension Plan?

Retirement is an inevitable stage in every working individual’s life. This stage of life is likely to induce feelings of apprehension, especially with regard to finances. As regular paychecks cease to arrive after retirement, the financial requirements of maintaining one’s lifestyle and meeting all expenses can become a burdensome worry in every retired individual’s mind. Many might need to compromise and adjust their lifestyles to fit the new reduced budget. Such sacrifices might be difficult. Therefore, to help ease out such tensions, insurance offers a product specifically designed for retired individuals, to provide a regular income to them after retirement. Some of these schemes also provide insurance cover. However, individuals must familiarize themselves with the different pension plans available in order to decide which pension one is best suited for them.

Benefits of Pension/Annuity Plans

A large part of the Indian population is fast approaching retirement. Such individuals must subscribe to pension plans. Several insurers in India offer pension/annuity plans, thus enabling people to choose the best-suited plan from an array of options. However, before choosing a certain plan, one must understand the terms and the offerings of the plan in order to determine its advantages and disadvantages. Here are some of the benefits that almost all pension plans offer.

Regular Income Post Retirement – Perhaps the biggest benefit of a pension plan is providing incomes to the policyholders after retirement. Pension schemes help people cover their living expenses post-retirement by providing a regular guaranteed income. While some plans provide lifelong income, certain others offer better returns. Insurers offer plenty of such plans for individuals to choose from.

Funds at Times of Need – Certain pension plans pay a lump sum to help policyholders meet major expenses of life. One might have several major expenses to handle even before retirement, such as purchasing a house, paying for the children’s education, etc. Before purchasing a policy, individuals must go over its details to know exactly what they will be getting from it.

Tax Benefits – Insurance policies generally offer a set of tax benefits. Most retirement insurance plans offer tax benefits and one must check the terms of the short-listed policies and filter out the ones without provisions of tax exemption under Section-80C of the IT Act. Investing money in a pension plan from a young age can help people save considerably on tax payments too.

Insurance Protection – Besides providing income after retirement, pension plans provide insurance cover too. This feature is highly beneficial as a fall back option for the policyholder's family in the unfortunate event of his/her death. Choose the retirement plan wisely in order to receive the best insurance coverage and death benefits.

Annuity/Pension Plan Options 

Pension or annuity plans are available in 5 segments:

Annuity Payable For Life: In these plans, a fixed annuity is paid to the policyholder at regular intervals throughout his/her life. The payments are stopped on the person’s death. People who do not have any obligations after death can opt for this option.

Annuity Payable For Life with a Guaranteed Period: In these schemes, the annuity payments are made for a certain period and thereafter until the annuitant is alive. A higher pension is received if the guarantee period is shorter. The payment stops after the death of the policyholder. People who have children to rely upon can opt for this option for a shorter timeframe.

Life Annuity With Purchase Price Return: These schemes allow the policyholder to leave some amount for their dependents. The annuitant receives a pension until his/her death, after which the purchase price of the policy is given to the nominee.

Increasing Annuity at a Fixed Rate:  In these schemes, the annuity paid increases every.

Joint life and Last Survivor Annuity: These schemes offer a pension to the policyholder/proposer of the policy until his death. In case of his/her death, the spouse is entitled to receive a considerable amount as a pension.

Types of Annuity/Pension Plans

These are the different types of Annuity/ Pension Plans available:

Deferred Annuity: In these policies, the annuitant pays the premiums for the entire policy term. After the policy term is over, the annuitant starts receiving the pension. The policyholder can either make regular payment or a one-time lump sum towards the plan. The investment is tax-free.

Immediate Annuity: In these policies, the annuitant has to make a lump sum deposit and the pension will begin immediately. Such investments are exempted from income tax.

With & Without Cover Pension Plan: ‘With cover’ insurance plans offer life cover and thus, a lump sum is paid to the family in the event of the policyholder's death. ‘Without cover’ policies do not provide any life cover; the amount accumulated till the date of the policyholder's death is paid to the dependents.

Annuity Certain: In these policies, the annuity is paid for a specific period. If the policyholder dies before that period, the nominee/beneficiary receives the amount.

Guaranteed Period Annuity: These are policies in which the annuity is paid for certain periods, irrespective of the policyholder's survival.

Life Annuity: These policies pay the annuity till the policyholder's death. If the policyholder's spouse outlives him/her, then the pension is paid to the spouse.

National Pension Scheme: The government introduced this scheme. It provides an option of withdrawing 60% of the amount when the policyholder retires and the remaining amount is used to purchase the annuity. The maturity amount for this type of policy is not tax-free.

Choosing the Right Pension Plan

A wide variety of pension plans are available in the market, offered by different insurers. Choosing the most-suited plan is a tedious task. Here are a few basic parameters to be evaluated before purchasing a pension policy.

• Returns – The return provided is the most important parameter for selecting a particular mode of investment. Choose a pension plan only after getting a fair idea about the returns it will provide. Guaranteed returns usually have a low rate of returns and are perfect for risk-averse people, while risk-takers can opt for the slightly riskier ones that promise high returns.

• Liquidity – Most pension plans have a lock-in period, during which the invested funds cannot be withdrawn. However, some plans offer a certain degree of flexibility regarding withdrawal.

• Tax Benefits – Payments made towards insurance premiums can help in saving on tax payments. Choose a pension plan that provides tax exemption not only for the invested amount but also for the amounts to be received as interest or dividend.

• Minimum & Maximum Investment Amounts – Different pension plans have different limits pertaining to the minimum and maximum investment amount permitted. Consider this while selecting a policy, keeping your budget in mind.

• Investment Mix – For pension plans that are offered as part of a mutual fund, a potential subscriber must find out the investment mix that the scheme offers.

• Additional Benefits – Retirement plans often offer additional benefits, such as life cover, tax advantage, etc. It is better to select a plan that offers the preferable additional benefits.

Pension Plan Riders

Most pension plans offer add-on riders which can be purchased by the policyholders to enhance the benefits provided by the policy. These are a few commonly available riders with pension plans:

• Accidental death and dismemberment rider

• Waiver of premium rider

• Term rider

• Critical illness rider

Popular Pension Plans in India

SBI Life – Annuity Plus

• Regular annuity from the age of 40

• Lifetime annuity pay-out paid for the policyholder and family

• Flexibility to choose the frequency of the payouts

• Accidental Death Benefit Rider

• Tax benefits

HDFC Life New Immediate Annuity Plan

• Guaranteed income for as long as the policyholder and his/her spouse lives

• A wide variety of annuity options

• Flexibility in selecting the frequency of annuity

• Death benefit available on certain annuity options

• Tax benefits

ICICI Pru Immediate Annuity

• Either one-time lump sum payment or five pay-out options

• Four modes of payout - monthly, quarterly, half-yearly or yearly

• Guaranteed annuity for 5, 10 or 15 years

• Annuity for life, with/without the return of purchase price

• Joint life coverage, with/without purchase price return

Reliance Immediate Annuity Plan

• Single premium plan

• Option for converting the earnings to regular income

• Option to either get regular income for entire life or leave some funds for dependents

• Tax benefits

BSLI Immediate Annuity Plan

• Get regular income during retirement

• Choose the frequency of the pay-out

• Medical test not necessary

• Tax benefits

FAQs

Is early withdrawal from pension plan allowed?

Early withdrawal from pension plans may be allowed, subject to government regulations and policy terms. Check with the insurer before investing.

What is the Death Benefit for a Pension Plan?

The death benefit is the amount paid to the nominee/beneficiary in case the policyholder expires.  

What is meant by 'Annuity' in a Pension Plan?

An annuity refers to the systematic payouts that policyholders receive from the pension plan after retirement.

Can one apply for a Pension Plan online?

Yes, most insurers have websites that allow users to view different pension plans as well as apply for a plan online.

Can one make the premium payment for a Pension Plan online?

Yes, most insurers have a secure payment system in their websites to enable policyholders to pay the premiums online in a timely and hassle-free manner.

How to change the premium payment frequency for a Pension Plan?

If one wishes to change the premium payment frequency, they must contact the insurance provider for the same. The availability of this facility is upon the insurer's discretion.