Advantages of Pension Schemes and Retirement Plans
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Advantages of Pension Schemes and Retirement Plans

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  • 15th Dec 2021
  • 319

Advantages of Pension Schemes and Retirement Plans

Retirement planning is necessary to ensure that you enjoy your post-retirement life just as you have imagined. With the rising medical costs and inflation, the sooner you start planning your retirement, the more secure your sunset years can be.

One of the best ways to start planning your retirement is by investing in a feature-packed pension plan. These plans help you accumulate and invest a fixed portion of your savings during your pre-retirement years for a financially secured future.


Here are five benefits that make pension plans a must for every individual concerned about retirement-

1.Disciplined Saving for Steady Future Income

While most people want to save and invest regularly, not many can maintain the level of discipline needed for such long-term financial commitments. A pension plan inculcates the habit of saving before spending so that you can stick to your long-term saving plan with utmost discipline.

After reaching your retirement age, the savings will be repaid to you in the form of a regular income, along with additional benefits. This makes these pension plans a practical way to secure your retirement life financially

2.Smoother Transition to Retirement Life

After working for 30-35 years, switching to a life where you don’t work anymore could be challenging. One of the biggest concerns during this transition is your financial stability. Having a pension plan that you have dedicatedly invested in over the years could help make this transition smoother.

It will eliminate the need to rely on your family members for financial support or liquidate your assets to manage basic and age-related expenses. 

3. Range of Add-ons to Choose From

While the primary objective of a pension or retirement plan is to provide policyholders with a steady source of income in the later years of life, some insurers also offer a wide range of add-ons. For instance, a pension plan could be purchased along with a life cover. With this plan, the policy nominee will receive a lump sum amount after the policyholder’s demise.

There are other add-ons such as permanent disability rider and accidental death rider for enhanced security. 

4.Tax-Efficient Retirement Planning

Pension plans are also highly tax efficient. With retirement plans , you get to choose from immediate annuity and deferred annuity. You invest a lump sum amount in immediate annuity plans and start receiving pension or annuity almost immediately after investing. While the interest you earn from an immediate annuity plan is taxed like any ordinary income, the principal is tax-exempt. 

In deferred annuity plans, there are two stages- accumulation and income. During the accumulation stage, the policyholders pay premiums at regular intervals. In the income phase, they can withdraw a specific portion from the saved money while the rest is invested to generate a steady source of income. The income grows without any tax deductions during the accumulation period. 

5.Lower Premiums for Younger Policyholders

Like health insurance and life insurance products, the premium in pension plans increases with age. By purchasing a retirement plan when you are in your 20s or 30s, you can take a step towards securing your retirement living at a lower cost compared to buying the plan in your 40s. 

Moreover, most insurers also let you choose assets in which your premiums would be invested. When you start early, you can choose more aggressive assets that often generate higher returns

Build the Retirement of Your Dreams with a Retirement Pension Plan

A pension plan is a product that has been created with the sole goal of providing financial security in the later stages of life. Many insurers also offer additional benefits, like guaranteed additions, annual bonuses, add-ons, and more, to help you secure your financial future and build the retirement of your dreams. 

Get in touch with a reputed insurer to know more about these benefits and understand how they can help supplement your retirement planning. 

- A Consumer Education Initiative series by Kotak Life

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