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One of the key stages of life that you need to save for throughout your working life is-RETIREMENT. Ideally, you should have enough savings post your retirement in order to sustain your lifestyle the way you wish to. Because everyone likes to continue living a lifestyle the way you have been living during your working life. Or maybe, a lifestyle even better than that!
Which is why, there are pension plans which are also called as retirement plans, being made available! These plans help you allocate some part of your savings to accumulate and then over a period of time, they offer you with steady income post your retirement.
For planning your retirement, there are heaps of pension plans available in the market. These plans are different from each other. Their benefits, features, exclusions etc. are different too. Pension plans are basically an investment or saving tool to provide for your future retirement needs.
All the pension plans are divided into two parts.
The first part is accumulation where you (insured) pays the premium.
The second part is distribution.
Here, you are paid a regular income through an annuity plan after your retirement. Annuity Plan is a type of insurance which starts paying you an income from the start as per the options chosen by you.
Here’s the list of all documents that is required to buy pension plan in India:
Document for Age proof – Any of the following can be presented as an age proof
Document for Identity proof – Any of the following document to prove Indian National Citizenship
Document for Address proof – Any of the following document can be used to support your permanent residential address.
Document for Income Proof – Income proof specifying the income of the policyholder.
Submit Proposal Form – Must submit duly filled proposal form to apply for a pension plan.
Medical Reports – Some life insurance companies may ask for a medical check-up before accepting your proposal for a pension plan. Medical reports are required to be submitted.
What should I keep in mind before buying a retirement/pension plan?
First, decide your retirement age and the amount you wish to save. Second, compare various pension plans in terms of vesting age, annuity, surrender charges, premiums, participating or non-participating, maturity benefit and death benefit. Third, seek financial advice from experts.
Which pension plan should I opt- Traditional or ULIP pension plan?
If you are planning way ahead than your retirement, say more than 10 years, it is advisable to opt for a ULIP based pension plan. As the premiums are invested in equity markets and has a good return on investment. However, you should keep in mind the charges levied under a plan. For which, you can compare pension plans.
What if I surrender my pension plan before maturity?
If you surrender pension plan before maturity, you may receive surrender value. However, these surrender value received is taxable as per the tax slab. Moreover, you may have to pay taxes that were exempted for all premiums paid until the exit. Kindly consult your tax advisor for more details on the same.