Minimum Guarantee
Every pension plan needs to have a
minimum guarantee. As per IRDA guidelines, there should be "on-zero
returns" on all premiums or guaranteed maturity benefits. Most insurance
companies guarantee a minimum of one percent of total premium over the complete
policy term.
Tax Benefits
The final payout is provided in two
ways. 33% of final pay out can be withdrawn in lump sum and is not taxable.
However the rest of the amount is taxable.
Types of Retirement Plans
Deferred Annuity
A deferred annuity plan allows you
to accumulate a corpus through regular premiums or single premiums over a
policy term. After the policy term is over, pension will begin.
Immediate Annuity
In an immediate annuity plan,
pension begins immediately. One has to deposit a lump sum amount and pension
will begin instantly.
With cover and without cover plans
The "with cover" pension
plans have life cover component in the plan. This implies that on the death of
the policyholder, a lump sum amount is paid to the family members although the
cover amount is not very high since a large part of premium is diverted towards
growing the corpus rather than covering for life risk. The "without
cover" pension plan implies that there is no life cover. Presently,
deferred annuity plans are "with cover" and immediate annuity plans
are "without cover".
Annuity Certain
As per this clause, annuity is paid
to the annuitant for specific number of years. The annuitant can choose the
period. If annuitant dies before the policy term, the annuity will be paid to
beneficiary.
Guaranteed Period Annuity
As per this annuity option, annuity
is provided to the annuitant for the period and beyond. If annuitant dies
during the period, amount will be paid to the beneficiary. If annuitant
survives, pension will continue throughout life.
Life Annuity
As per this annuity option, pension
amount will be paid to the annuitant until death. If annuitant chooses
"with spouse" option, after the death of annuitant, the pension will
continue and be paid to the spouse.
National Pension Scheme (NPS)
New Pension scheme has been
introduced by the government for people looking to build up pension amount. You
can put savings in new pension scheme which will be invested in equity and debt
market as per your preference. You can withdraw 60% of amount at retirement and
rest 40% must be used to purchase annuity. The maturity amount is not tax free.
Pension Funds
Owing to the low front load charges,
pension funds are a good way to accumulate corpus amount. Pension funds are
meant for long term and hence perform better. PFRDA, the government body has
allowed 6 companies as fund managers.
Compare Best Pension Plans
It is imperative to choose a pension
plan which offers the best possible returns. That can only be determined by
comparing the different pension plans available in the market.