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Which Pension Plan Suits You best?

A pension plan is a type of fund where a portion of your pay is invested during your employment tenure. Click here to know which pension plan suits you best.

  • Jul 08, 2022
Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Retirement opens up a world of opportunities. You finally get the time to tick everything off your wish list. You will, however, require adequate funds to maintain your current lifestyle and fulfill the long-awaited dreams. Given the rising inflation rate and the limited social security programmes available for senior citizens, it would not be a wise decision to rely totally on your savings and investments.

Moreover, by the time you retire, your living expenses will have increased. You would also need to account for medical emergencies and other unforeseen expenses. As a result, thorough retirement planning is required to cover all these and other expenses. This is where pension plans come into the picture.The best pension scheme for senior citizens can provide a supporting income, letting you enjoy complete financial freedom in your golden years.

Fixed investment in the best pension plan can assist you in achieving financial security and overcoming any other future worries. These long-term plans offer dual benefits of investment and insurance cover, where you can invest monthly or quarterly as per convenience. All you do is pay a fixed amount regularly for a defined period and enjoy

Pension Plans: Your Safety Net for A Secure Future

A pension plan is a type of fund where a portion of your pay is invested during your employment tenure. This investment also aids in the collection of payments throughout the retirement era. Moreover, the investments are suitable for financially secure senior persons because they yield future advantages.

the advantages when you retire. By contributing a set amount to your pension plan monthly, you gradually accrue a sizable sum. This will ensure a constant stream of income after you retire.

The host of benefits of investing in the best pension scheme include:

  • Guaranteed Income/Pension The steady flow of income ensures you enjoy a financially independent post-retirement life.
  • Tax Efficiency Some pension plans like Atal Pension Yojana (APY) and National Pension Scheme (NPS) are entitled to tax deductions and exemptions under section 80C of the Income Tax Act, 1961.
  • Flexible Vesting Age The age when you begin to receive your monthly pension varies from scheme to scheme and insurer to insurer. While the best pension plans in India keep their minimum vesting age at 45-50 years, which can be extended up to 70 years, some companies allow it to be up to 90 years.
  • Liquidity Retirement plans are primarily the product of low liquidity. Therefore, it ensures funds to fall back on during emergencies without relying on bank loans or others for financial requirements.

Investing in the best pension scheme in India as per your financial goal is the first criteria you must follow. You have several types of pension plans available in the country, which gives you varied benefits. Each plan has a specific classification concerning its structure and benefits.

Below mentioned are the different types of pension plans available in India:

  • Deferred Annuity
  • Immediate Annuity
  • Certain Annuity
  • With Cover and Without Cover Pension Plans
  • Guaranteed Period Annuity
  • Life Annuity
  • Life ULIP Plan
  • Defined Contribution Pension Plan
  • National Pension Scheme

Comparing the various pension plans will help you understand it better and further assist in making the best selection.

Pension Plans Tax on Income Withdrawal Flexibility Lock-In Period
Deferred Annuity Taxable Post 1 year 10% of the annuity value can be withdrawn Up to 10 years
Immediate Annuity Applicable Income Tax rate Post 1 year 10% of the annuity value can be withdrawn Up to 15 years
Certain Annuity Under the Income Tax rate 33% of fund value upon retirement 5 years, 10 years and 15 years
With and Without Cover Pension Plans Taxable Up to 33% upon retirement 5 Years
Guaranteed Period Annuity Taxable Up to 33% of fund value upon retirement Stops on death of annuitant
Life Annuity Taxable Withdrawal up to 33% of fund value upon retirement 15 Years
Life ULIP Plan Exempt 100% withdrawal any time after 5 years 5 Years
Defined Contribution Pension Plan Taxable Up to 33% of Fund value on retirement Depends on type of pension fund
National Pension Scheme Exempt No. Partial withdrawal up to 25% after 10 years Can be withdrawn at the age of 60

Retirement planning is not only an essential part of your total financial planning, but it is also critical to begin early in life. Always keep in mind that early and methodical retirement planning can help you lessen the financial load you will face throughout your retirement years and plan for a worry-free and financially secure retirement. Because with a well-planned retirement, you gain a sense of self-reliance and emotional well-being in addition to the guarantee of savings.

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Ref. No. KLI/23-24/E-BB/1052


- A Consumer Education Initiative series by Kotak Life