Retirement should be a golden reward that you receive after dedicating years of service towards your professional career and growth. It also marks the beginning of a period when people like to spend some quality time with their near and dear ones and look forward to doing things that they had put on the backburner. However, in the absence of a regular income, it can jeopardise your savings by straining your finances. Therefore, you need a look at the best retirement plans that can provide you with regular income benefits, known as Pension.
But how does pension work? Pension is a payout that a person receives after their retirement. It is a tax-efficient method of putting your money aside for the rainy day. You can also invest in the best pension plan to receive a steady income after you retire from your employment. All you need to do is pay regular premiums to keep this policy active. Then, the pension plans kick in, and you can start paying your monthly income as soon as you reach your retirement age.
However, choosing the best retirement plan is not as easy as it seems. With every investment decision, you need to assess all the advantages and features to select a plan that meets your needs and requirements.
That said, here are some things you need to consider when looking at the best pension plan for your future investment.
Terms and conditions
Don’t trust a pension plan because it promises to be the best retirement plan in India. First, you need to check the policy coverage and conditions to determine how suitable they are for your needs. For example, the retirement benefit can be either immediate or deferred. If you choose the immediate option, you will start receiving regular payouts when you purchase a plan, and the premium has been paid in full. On the other hand, a deferred annuity plan first accumulates the money for a specified period of time and then starts providing the benefits. Needless to say, the coverage and scope of the policy must meet your financial needs.
1. Accumulation duration
This feature indicates the number of years during which your funds will build into a huge corpus of funds that will take the form of regular payouts, aka Pension, after your retirement. The best retirement plan is the one that covers all your monthly expenses and requirements with the help of this payout so that you can live a financially independent life.
2. Sum assured
There is only so much your policy can do if it doesn’t cover you adequately. That is why sum assured must be carefully chosen to pay for your living expenses with ease. Unless it offers complete coverage to you and your spouse after retirement, even the best retirement plan will fail to achieve its purpose.
3. Partial withdrawal
It is a helpful feature when buying a pension plan. A flexible retirement scheme will allow you to make partial withdrawals during the period of fund accumulation. This flexibility will help you cater to your financial emergencies through your own savings rather than depending on friends/family for money or taking out expensive loans from the bank.
4. Minimum assured annuity benefit
Before you buy a pension plan, be sure to check the minimum annuity benefit that your insurer will pay after the term period is over.
5. Flexibility of investments
Ideally, the best pension plan is the one that gives you the flexibility to choose your fund option, especially if the instrument returns are market-linked. Therefore, look for plans with flexibility to invest as per your tolerance for risk.
6. Tax saving
Any retirement plan that you choose to invest in must allow you to save tax and make you eligible for tax exemptions as per the prevailing tax laws. So be sure to educate yourself about the tax-saving component of your pension plan.
7. Surrender value
You should know the surrender value of your retirement plan in case you want to surrender the policy before maturity.
8. Additional benefits
The plan must also give you additional benefits, such as riders and coverage for unforeseen expenses that may arise out of old age. But before you add riders to your plan, remember to check the payable premium. The plan should be affordable and sustainable after you have added the riders to it.
Many insurance providers offer robust pension schemes to help you slide into your retirement with ease. But remember to keep all these features in mind when you are browsing the plans online.