Pension Plan Features, Benefits and Types of Pension Plans
Retirement planning is as important as planning for other important goals in life. After all, you'd definitely want to live a financially secure life even after your retirement. But as compounding plays a significant role in most types of pension plans, it is vital to invest in one as early in life as possible.
But to select one, it is essential to first understand the features and benefits of all the popular plans. To help you make the decision, some of the most popular retirement plans, their features and advantages are discussed below-
1. Immediate Annuity Plans
As the name suggests, Immediate Annuity Plans allow a policyholder to start receiving an annuity or a fixed income within one month from purchasing the policy. These plans allow lump sum investments and the income is guaranteed for life.
You can start investing in them as early as when you are 30 years, and most of them also offer many different types of annuity options, including death benefit. The death benefit ensures that the nominee of the policy continues to receive annuity even after your death.
One of the most important benefits of this type of pension plan is that they also offer critical illness and permanent disability benefit. With the rising cost of healthcare in the country, this feature can help you manage a critical illness or disability with ease. However, not every immediate annuity plan comes with this benefit.
2. Unit Linked Plans
These type of plans focuses on helping you build an extensive retirement corpus while also offering life coverage. You can go for a lump sum or regular investment option with these plans. In these, you get to select between debt or equity funds and all your investments will be made in the fund of your choice. You can check pension fund performance online to monitor your investment easily.
Moreover, to eliminate the chances of capital losses, most of these plans come with assured capital protection. In case if the value of your investments or maturity is less than that of the premiums you have paid over the years, the insurance provider will offer 101% of the premiums. This ensures that you will always get a maturity amount that is higher than the premiums that you pay.
Some of the top insurance providers also offer something known as Pension Boosters. Once you have completed investing for 10 years in a Unit Linked Plan, the insurance provider will add an average total fund value of up to 5% to your retirement savings every 5 years to grow your savings. Tax benefits and multiple payout options are two other important features of these plans.
3. National Pension Scheme (NPS)
The National Pension Scheme is a market-linked pension scheme offered by the central government. With NPS, you can invest a lump sum amount every year or make monthly payments towards your retirement. The investment can be either done in debt or equity markets as per your choice.
When you retire, you can withdraw up to 60% of the total investment at once, and the rest can be used for buying an annuity. Similarly, there are other government schemes like EPF (Employees Provident Fund) too.
Pension Plans for a Secure Retirement
If you are planning to purchase or invest in a pension plan, make sure that you check the features, working, and benefit of pension plan carefully before selecting. There are now many different types of plans, and even the insurance providers add their own benefits and features to offer maximum advantages to the customers.
So, make sure that you carefully check the plan as well as its terms and conditions before making a decision. Consultation with an advisor from the insurance provider can help make the selection easier.
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