Retirement opens up a new phase of life in an individual’s life. You finally have the time to check all the things on your bucket list. Hence, you need adequate funds so that you don't have to compromise on your lifestyle during those post-retirement years.

In the absence of a regular source of salary or income, you have to rely entirely on your savings and investments.

Living costs will rise by the time you retire. You also have to take into account medical emergencies and other unforeseen expenses. Thus, to fund your old-age expenses, you need careful planning.

Pension funds can provide a supporting income, letting you enjoy complete financial freedom in your golden years.

Let us understand a bit about pension funds.

What are Pension Plans?

Pension plans are investment tools that help you build your retirement fund. Offered by life insurance companies, these low-risk plans provide you with a pre-determined and regular stream of income post retirement.

There are different types of pension plans in India that you can choose from based on your financial goals, retirement needs, risk tolerance and personal preferences.

Who Should Consider Pension Plans?

Pension or annuity plans are valuable financial tools that can help you achieve your retirement goals. They provide you with the required financial support to live a financially independent life even during your retirement.

You want to continue your current lifestyle even during retirement. You may also have post-retirement goals, such as buying a house, traveling, pursing a hobby, starting a new venture and more. Pension plans provide you with regular income to help fulfil your financial needs during your retirement. You should consider buying an annuity plan if you are looking for a worry-free retirement.

Types of Pension Plans in India

1. National Pension Scheme (NPS)

National Pension Scheme (NPS) is a retirement scheme introduced by the Government of India. It is available to employees across public, private and unorganised sectors to prepare for their future financial needs. Some key features include:

• Maturity: NPS matures when you reach 60 years of age
• Investment amount: You can start investing in NPS with a minimum of ₹ 1,000, with no upper limit
• Investment options: NPS offers flexibility to invest in a combination of equity and other funds based on your preference and risk appetite
• Withdrawal: Upon retirement, you can withdraw up to 60% of your accumulated savings. The remaining 40% should be used to buy an annuity to ensure a steady income post-retirement

2. Public Provident Fund (PPF)

PPF is a long-term investment scheme with a 15 years tenure. Thus, the impact of compounding is enormous, especially towards the end of the term.

Every year you can invest a maximum of ₹ 1.5 lakh in your PPF account. You can pay upfront or through twelve instalments staggered over the financial year. Your PPF investments are eligible for deductions^* under Section 80C of the Income Tax Act, 1961 (ITA).

The government sets the interest rate on PPF every financial quarter, based on the profits from government securities. The funds are not market-linked.

3. Employee Provident Fund (EPF)

EPF is a government savings platform for salaried employees. Both your employer and you have to make equal contributions towards your EPF account. Your share is deducted from your salary every month. The Employees' Provident Fund Organisation (EPFO) sets the interest rate on the investment. On retirement, you receive the total funds contributed by you and your employer along with the accrued interests.

4. Annuity plans

Such plans provide a life cover^! along with a regular source of income. If an unfortunate event occurs while the plan is active, your family member receives a lump sum payout, however, there are other options too that do not offer this financial coverage. Annuity plans are of two types:

A. Deferred Annuity

It is a contract with an insurance provider helping you build a retirement corpus. You can make a single lump sum payment or pay regular premiums over a fixed time frame – the policy term. Thus, this scheme helps you invest as per your resources.

When the policy period ends, your pension starts. If your retirement date is far in the future, this plan is suitable for you.

B. Immediate Annuity

It is a contract between an individual and an insurance company, wherein the individual pays a lump sum amount and receives guaranteed^~ income for a lifetime, starting almost immediately.

ICICI Prudential Life's Guaranteed Pension Plan is one such retirement policy that offers both Immediate and Deferred Annuity options. It offers several benefits:

• A lifelong guaranteed^~ income
• Eleven annuity options, including pension for your spouse/family member or return of purchase price to your nominee in your absence
• Options to avail income on a monthly, quarterly, half-yearly, or annual basis
• Top-up option to systematically increase your annuity income
• Attractive discounts for NPS subscribers or existing customers
• Tax^* benefits on the premiums paid
• Option for lump sum payout on the diagnosis of critical illnesses or permanent disability is covered under the plan
• Options to get back the purchase price earlier in your lifetime

Thus, this plan secures you against all age-related exigencies and can be a lucrative financial cover in your retirement years.

^~T&Cs Apply

Atal Pension Yojana

Atal Pension Yojana is a pension scheme designed for citizens of India. It primarily targets employees in the unorganised sector. Subscribers aged between 18 to 40 years can contribute towards this scheme. Upon reaching the age of 60, subscribers receive a guaranteed minimum pension of ₹ 1,000, ₹ 2,000, ₹ 3,000, ₹ 4,000 or ₹ 5,000 per month. The exact pension amount depends on the contributions made by the subscribers during their working years.

Pension Plans with Life Cover

Pension plans with a life cover^! are investment plans provided by life insurance companies. These plans consist of two main components.

Firstly, the life cover^! ensures the financial security of the policyholder's family by paying a lump sum in case of the policyholder's demise. While the insurance benefit may not fully replace the policyholder's income, it can help cover basic financial needs and support the family during a challenging time.

Secondly, the investment component of the plan helps the policyholder build fund to meet their retirement financial requirements.

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Guaranteed Period Annuity

Among the different types of retirement plans, the guaranteed period annuity offers benefits like low risk and guaranteed payouts. The plan gives assured payouts for a fixed duration which ensures your financial security during retirement. You will receive regular income which ensures your peace of mind and a secure retirement.

Pension Plans with Life Cover

Different types of retirement plans offer various benefits as per your needs. A pension plan is designed to provide a regular retirement income. However, some plans also financially secure your loved ones in case of an unfortunate event. You can choose such plans based on your needs and financial goals.

How to Buy Pension Plans in India?

The process of purchasing various types of retirement plans in India is given below:

Evaluating Financial Status

The first step involves checking your financial status, such as your income, expected income during retirement and existing investments. Identifying your income from other sources like business profits, income from a rental property, and other investments, can help you calculate the amount that you can invest in retirement savings.

Assess Financial Situation

You must identify the age at which you want to retire, desired lifestyle and day-to-day expenses during retirement. Based on these factors, you can choose a retirement plan that aligns with your financial goals for retirement.

Compare Policies

Comparing multiple types of retirement plans allows you to make a well-informed decision. You must analyse key aspects, such as features, benefits, terms and conditions, inclusions and exclusions and more. It helps you identify the most suitable plan that aligns with your retirement goals, risk appetite and financial lifestyle. A thorough comparison can help you choose a pension plan that offers the best value and one that fits within your budget.

Pension Plans offered by ICICI Prudential Life Insurance

ICICI Pru Saral Pension

This is an annuity plan that can help you create a steady income during your retirement years. The plan offers a one-time lump sum premium payment option in return for a guaranteed^~ income for life.

^{^}T&Cs apply

The income you receive during retirement is fixed and begins immediately after purchasing the plan. It is a well-rounded plan with features including flexible payout options and tax^* benefits.

ICICI Pru Guaranteed^~ Pension Plan Flexi

With this annuity plan, you can save money regularly during your earning years and receive regular income throughout your retirement. The plan offers multiple options to receive annuity payments, such as on a monthly, quarterly, half-yearly and yearly basis.

ICICI Pru Guaranteed^~ Pension Plan Flexi offers the ‘Save the Date’ feature that allows you to select a specific date during your retirement to start receiving your annuities. The plan also offers the option to invest any surplus amount in the plan during the policy period, which leads to an increase in the income from the plan.

Conclusion

Retirement planning should be customised to your individual needs and circumstances. Evaluating your financial status, assessing your current situation and comparing various retirement policies can help you select a product that aligns well with your retirement goals.

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