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pension plan Pension Plan

Retirement is an inescapable period of life. Would you want to be dependent on others for your living at the old age? If not, then you should plan for your retirement today itself. Pension Plans essentially help you invest your savings so that it can be used after your retirement. Every individual wants to have a tension free and peaceful retired life after years of hard work. However with the rising inflation and people preferring to live in nuclear families one cannot expect to have a tension free life unless one has accumulated great wealth, inherited a huge sum of money or at least have a retirement plan/pension plan.

Pension plan is nothing but:
Investment + Death Benefit + Survival Benefit + Regular Income + Tax Benefits


People who Plan for retirement at an early age do not have to depend on others to make their ends meet.

Features of a conventional retirement plan:

Minimum Guarantee

Most insurance companies guarantee a minimum of one percent of total premium over the complete policy term. As per IRDA guidelines, there should be "on-zero returns" on all premiums or guaranteed maturity benefits.

New Pension Scheme Tax Benefits

33% of final pay out can be withdrawn in lump sum – This is not taxable. The rest of the amount is taxable.

How does it work?

There are two phases – Accumulation phase and Distribution Phase.

Accumulation Phase It is the time period during which you regularly pay premiums to the insurance company to receive income post retirement in the form of pension.

Distribution Phase This phase may be described as the phase when accumulated wealth is being used for paying the annuities to the policy holder.

Tax benefits

As per section 80CCC of the Income Tax act, the premiums paid out for the pension plan are subjected to a deduction of up to a maximum of Rs 10,000 on taxable income.

Types of Pension Plans

1. Deferred annuity plans: You pay a fixed amount as premium and get your money back in regular installments every month. If you have taxable income, it is given to you after tax deductions.

2. Immediate annuity plans: Here you can invest a lump sum amount of money and get a fixed amount of money for a fixed amount of time as long as you live. There are different types of plans that insurance companies offer:

  • a. Guaranteed period annuity: fixed amount + fixed duration Here time is fixed irrespective of the fact that the person survives or not. For example, if someone decides to buy this plan for 20 years, s/he will get a certain amount of money for next 20 years. However, if the policy holder expires after 10 years, the money will be given to the nominee for the next 10 years.
  • b. Annuity certain: fixed amount + survival benefits Policy holder will get a fixed amount of money for a fixed duration – here if s/he expires, nominee will get the pension for the remaining years. However, if the policy holder survives, s/he will get the pension as long as s/he lives.
  • c. Life Annuity: fixed amount + Extra benefits Pension as long as policy holder lives. If the person dies, then the nominee will get the purchase price of the annuity. Purchase price = assured amount to be received on maturity + bonus

How to plan for retirement?

1. How much is required?
While using the Pension plan calculator, remember to include increased medical cost, vacations and gifts for family. However, reduce the costs like children’s education and rent, if you own your home.

2. Know what suits you.

  • Right Plan: choose a plan that can effectively deal with inflation and yield returns that would be sufficient to meet your needs after retirement. Also, the plan you buy should complement your existing retirement savings.
  • Pension guarantee: The perfect retirement plan is the one that also takes care ofyour dependents’ needs in your absence.
  • Flexibility of Premium payment: The ability to pay higher premium will also increase, as you will advance in your career.
  • Additional Benefits: Bonus and benefits. Benefits, such as completion of payment premiums, help in maintaining your future goals even in your absence by self-funding of premiums in case of an untimely death of the policyholder; while the additional benefits, such as loyalty bonus, fetch you a larger amount on your retirement.

3. Know how much you need to save regularly.
How much you can save, depends on how much you are earning today and how much your family expenses are. Reduction in extra expenses, even the smaller once, can provide you and your loved ones, a comfortable life tomorrow.

4. Select the right retirement plan.
Remember, extra benefits come with extra premium. While deciding, do consider these points: Child age (will s/he be mature enough by the time policy expirs), nuclear or joint family, rented or own house, number of dependents, dreams to be fulfilled after retirement (hobbies etc), nature of business or expected increase in future salary etc.

5. Start saving now.
Longer the duration, smaller will be the installments. Enjoy the power of compounding.

6. Systematically invest a fixed amount.

Documents Required To Buy Pension Plan

Age Proof

Birth Certificate, 10th or 12th mark sheet, Driving License, Passport, Voter ID, etc.(Any one)

Identity Proof

Driving License, Passport, Voter ID, PAN Card, Aadhar Card, which proves ones citizenship

Address Proof

Electricity Bill, Telephone Bill, Ration Card, Driving License, Passport, should clearly mention the permanent address

Income Proof

income proof specifying the income of the person buying the insurance

Proposal Form

duly filled in proposal form is required

Medical Tests

Some companies may require medical check-up in order to make sure that the insured does not suffer from any chronic illness.


Please note that the information provided is collected from sources publicly available & we believe to be reliable. The website doesn't warrant the accuracy, reliability & absolute information available on the website. Participation by site visitors or registered customers is on a voluntary basis. The policies are offered by various life Insurance & non-life insurance offering companies and Click2cover.in does not seek to, either directly or indirectly, advise, offer, solicit or recommend that any person who is or proposes to become its member should purchase the Policy.

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