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Which Pension Plan Suits You best?

The best pension plan has options like employer-sponsored plans for matching contributions or individual retirement accounts for self-employed individuals or those without employer benefits.

  • 3,627 Views | Updated on: Jun 14, 2024

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 fulfil your long-awaited dreams. Given the rising inflation rate and the limited social security programs available for senior citizens, it would not be a wise decision to rely totally on your savings and investments.

Key Takeaways

  • Consider employer-sponsored plans for matching contributions and additional benefits.
  • Research different pension plan types, including defined benefit and defined contribution plans.
  • Evaluate investment options within pension plans, such as stocks, bonds, and mutual funds.
  • Maximize contributions to take advantage of potential tax benefits and employer matches.

Fixed investment in the best pension plan in India 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

Types of Pension Plans in India

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

  • Deferred Annuity: A financial product where payments begin at a future date, often used for retirement planning.
  • Immediate Annuity: Provides income payments shortly after the initial investment, typically used for immediate retirement income.
  • Certain Annuity: Guarantees payments for a specific period, offering security regardless of lifespan.
  • With Cover and Without Cover Pension Plans: Pension plans may include life insurance cover (with cover) or solely focus on pension benefits (without cover).
  • Guaranteed Period Annuity: Ensures payments for a predetermined period, offering stability and security.
  • Life Annuity: Provides regular payments until death, offering lifelong financial support.
  • Life ULIP Plan: Combines life insurance coverage with investment options, providing flexibility and potential growth.
  • Defined Contribution Pension Plan: Contributions are fixed, but the eventual benefit depends on investment performance.
  • National Pension Scheme: A government-sponsored retirement savings plan, offering tax benefits and investment options for citizens.

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

Pension Plans

Tax on Income

Withdrawal Flexibility

Lock-In Period

Deferred Annuity


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


Up to 33% upon retirement

5 Years

Guaranteed Period

Annuity Taxable

Up to 33% of fund value upon retirement

Stops on the death of the annuitant

Life Annuity


Withdrawal up to 33% of fund value upon retirement

15 Years

Life ULIP Plan


100% withdrawal any time after 5 years

5 Years

Defined Contribution Pension Plan


Up to 33% of Fund value on retirement

Depends on type of pension fund

National Pension Scheme


No Partial withdrawal up to 25% after 10 years

Can be withdrawn at the age of 60

Understanding Pension Plans

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.

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.

Benefits of Investing in the Best Pension Scheme

It is essential to secure your financial future, especially during retirement. While various investment methods exist, one often overlooked but crucial option is investing in a pension scheme. A well-chosen pension scheme can provide a myriad of benefits, offering individuals peace of mind and financial security in their golden years.

Guaranteed Income

A guaranteed income or pension provides a reliable stream of money, ensuring a financially secure post-retirement life. With this steady flow of income, individuals can plan and enjoy their retirement years without worrying about financial instability.

Tax Efficiency

Certain pension plans, such as the Atal Pension Yojana (APY) and the National Pension Scheme (NPS), offer tax deductions and exemptions under section 80C of the Income Tax Act, 1961. This tax efficiency aspect helps individuals save on taxes while contributing towards their retirement corpus, thereby enhancing their overall financial planning.

Flexible Vesting Age

The age at which one can start receiving the monthly pension varies across different schemes and insurers. While some of the top pension plans in India set their minimum vesting age at 45-50 years, with the possibility of extending it up to 70 years, certain companies even allow for a vesting age of up to 90 years. This flexibility enables individuals to tailor their retirement plan according to their specific needs and circumstances.


Although retirement plans are typically associated with low liquidity, they still offer a valuable source of funds during emergencies. This liquidity aspect ensures that individuals have a financial safety net to rely on without having to resort to bank loans or other sources for their immediate financial requirements. Thus, even though retirement funds are primarily intended for long-term savings, they can serve as a backup during unforeseen circumstances.

Final Thoughts

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.



How much should I contribute to my pension plan?

The amount you contribute to your pension plan depends on your financial situation and retirement goals. As a general rule of thumb, aim to contribute as much as you can comfortably afford, ideally maximizing any employer-matching contributions to maximize your retirement savings.


What investment options are available within a pension plan?

Pension plans typically offer a range of investment options, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Your choice of investments should align with your risk tolerance and investment objectives. Consider diversifying your portfolio to spread risk and maximize returns.


Can I switch to a different pension plan if my circumstances change?

Yes, in many cases, you can switch to a different pension plan if your circumstances change or if you find a better-suited option. However, it is essential to consider any potential fees or penalties associated with transferring your pension savings and to carefully evaluate the features and benefits of the new plan before making a decision.

- A Consumer Education Initiative series by Kotak Life

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

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