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5 Reasons to Invest in the Best Pension Plan

dateKnowledge Centre Team dateJune 22, 2021 views352 Views
Retirement and Pension Plan | Reasons to Invest in the Best Pension Plan

The middle-class Indians are the ones who suffer the most from inflation and economic disruption. The thought of not having nothing set aside for our future sends shivers up everyone's spine. This leaves a lot to learn about retirement and pension plans as they help individuals plan their lives and ensure financial stability. Being financially stable is necessary, especially during our old age when we have stopped working completely. With no source of earning, it becomes challenging to manage our expenses. That is where pension plans play a dominant role.

5 Reasons to Invest in the Best Pension Plan

There are a lot of benefits that pension plans offer to individuals. Some of them are as follows:

1. A steady flow of income

A pension or a retirement account ensures that you can have a steady stream of money until you retire. You will then be able to live a more comfortable and relaxed life. Certain conventional strategies also have benefits.

Learn how to ensure a regular income stream for your family.

2. Weak social security in the Indian subcontinent

In contrast to other nations, India lacks a social security system (Social security refers to actions taken by the Indian government or governing body.)

When all other sources of income have been exhausted, these steps are usually taken to provide income to the client or his relatives. In India, only a few schemes and programs address the needs of the elderly, such as retirement plans and other schemes.

3. Inflationary pressures and rising health prices

Inflation harms our economy to the point that the price of everyday goods and services has risen over time. Having a pension plan would certainly relieve any stress and have financial stability until you retire.

4. Tax advantages

Purchasing a pension scheme at a young age is always a good idea. You can also get tax incentives under the terms of Section 80C of the Income Tax Act if you do so.

5. Increase in life expectancy rate

According to the World Bank, India's life expectancy in 2017 was 68.78 years. In the last 20 years, life expectancy has risen by almost ten years. The higher the life expectancy, the more money would be required in old age or after retirement.

What are Pension Plans and What are the Different Types of Pension Plans?

Pension plans, in plain terms, are retirement plans that enable both the employee and the employer to pay a certain sum of money. These funds are put aside for the good of the employee. This money is then returned to the employee as he or she retires.

A few pension plans in which an employee can choose to contribute a portion of his current income will potentially benefit him and his family as he retires.

Pension schemes are the most widely used. The Indian pension scheme is made up of three parts. Civil servants' pensions, mandatory pension schemes administered by the Employees Provident Fund Organization of India, and the National Social Assistance Programme for the unorganized sector together make up the Indian Pension Plans.

The most common pension plans in India are listed below. To choose the most effective option, you first must become familiar with the various plans available and choose the one that best suits your needs.

1. Immediate annuity

This scheme requires a lump-sum investment, and the pension payments begin immediately. Also, there are deferred annuity plans that allow you to build up a substantial sum of money throughout the policy's life by paying daily or single premiums. When the policy term's maturity period has ended, the pension will continue. There is also a tax advantage of this sort of scheme.

2. Pension plans that provide cover

These plans contain life insurance as one of the benefits provided to the customer. This means that there will be a lump-sum payment process given to the family members of the policyholder in the event of their death.

3. Pension plans that don't provide cover

In this case, no life insurance is provided to the customer when they opt for the pension plan. Only the premiums charged or the money spent is returned to the nominees. The money may or may not be repaid with interest.

4. National pension scheme (NPS)

The NPS scheme allows people to prepare for retirement by saving in the stock and bond markets, depending on their preferences. 60 percent of the funds will be withheld at maturity, and the remaining 40 percent must be used to buy an annuity contract.

National Pension System

Pension and Retirement Plans by Canara HSBC Oriental Bank of Commerce Life Insurance

A well-thought-out retirement strategy will help you avoid the worries of rising inflation and living costs in your golden years. The key to a happy retirement is to prepare ahead of time and take advantage of the best pension options available.

Canara HSBC Oriental Bank of Commerce Life Insurance offers various plans to its customers, keeping their needs and requirements in mind. Some of them are:

1. Pension4Life

This policy offers a variety of annuity choices from which to select. You may also choose between receiving an instant or delayed annuity. This package has a fixed lifetime income that is deposited directly into your bank account. There is also the possibility of receiving monthly payments for the rest of your life or the life of your wife.

2. Guaranteed Savings Plan

It guarantees coverage at retirement and offers life insurance for the full term by only charging premiums for a short time. There's even more security for the families in the event of an accident or death. Customers should also choose a payment term that is most convenient for them.

Learn more about Guaranteed Savings Plan.

After considering all the policies and plans, customers can make an informed choice and financially secure their future with savings and a steady income. It is always better to think of the future as no one knows what may happen in the future and how their life may take a turn, leaving the rest of the family financially weak.

With all the pension plans and schemes offered in today's day and age, both online and offline, customers can easily purchase one based on their needs.

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Frequently Asked Questions (FAQs) for Retirement and Pension Plans

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the Premium calculator available in the ‘Tools and Calculator’ section of www.canarahsbclife.com.

The Invest 4G plan offers three benefit options to choose from. If you have opted for the Life Option or Whole Life Option, the insurer will pay the nominee(s) death benefit if the policyholder meets with an unfortunate incident. However, in the Life Option with Premium Funding, the policy continues even after the death of the policyholder. The company pays the remaining premiums until the policy matures.

Life is unpredictable and so it is important to prepare for all eventualities. If you regularly save a substantial amount of your income for retirement, the corpus may expand to a comfortable level before retirement. In case you become disabled and are unable to contribute to the retirement plans, most plans will continue to multiply your savings. The amount already accumulated will continue to grow and besides the existing plans you can also choose to invest in pension schemes specifically designed for people with disability.

Investment in ULIPs like Invest 4G plan qualifies for tax deductions under section 80C of the income tax law. The maturity benefits of ULIPs are also tax-exempt under section 10 (10D) of the Income Tax Act, 1961. However, if the premium paid during the policy term is more than 10% of the sum assured, the maturity proceeds will be taxable.

The concept of early retirement is catching up fast in India, but there are no specified ages for early retirement. While in some western countries the age between 35 and 45 is considered favourable for early retirement, in India the ideal age is 45-50 years. With the right planning and investments, it is not very difficult to retire early.

At the age of 35-40, people generally have several responsibilities such as children’s education and various EMIs. It is difficult to spare a substantial amount of income for retirement. Depending upon the needs of the household and the lifestyle, one should aim to save around 40-50% of his/her income. Around 10% of the income should exclusively be allocated for retirement planning. Here are some tips to choose the best retirement plan.

  • Focus on your needs: It is easier to formulate a strategy when the goal is clear. Make an estimate of the amount required to sustain your life. Take inflation into account and zero in on the targeted corpus.
  • Research thoroughly: Conduct thorough research before investing in any financial product. Read the term and conditions properly and try to understand how an investment product fits your needs.
  • Consider different products: The market is awash with all kinds of investment products. Do not follow conventional advice as the need of every person is different. Take into consideration all the suitable products, conduct an objective analysis and then invest.

Owning a house is a cherished dream for many. There are several ways to save for a new house, but in urgent cases, people may be tempted to withdraw from their retirement fund. There are various financial products for retirement planning, and all have different withdrawal rules. In the case of the National Pension Scheme, partial withdrawals for special purposes like buying a house are allowed only thrice during the policy tenure. However, to avail the withdrawal facility, you should be an NPS investor for at least 10 years and you are permitted to withdraw only 25% of your contribution. If you have a PPF account, you can withdraw 50% of the accumulated amount, but only after staying invested for at least 6 years. The Invest 4G plan also allows partial withdrawals after five years of investment.

The quantum of monthly savings depends on the specific needs of the buyer. Financial advisors, however, suggest people save around 15% of the monthly income for retirement.

Retirement plans such as NPS have a very low entry threshold. It is also open to all and anyone can open an NPS account and start saving. A small business can also invest in Invest 4G plan from Canara HSBC Oriental Bank of Commerce for as low as Rs 5000 every month.

The choice between paying off a student loan or start a retirement account is not a difficult one. Starting early for retirement planning has its own advantages but extending the student loan will increase the interest burden. You will have to find a balance between the two. Try to pay off the student loan as soon as possible, but do not hold back on investing in a retirement account.

Most people nominate their spouse to receive retirement benefits in their absence. But a spouse is not automatically entitled to be the beneficiary of a retirement account owned by the other spouse.

Gold is a safe investment asset and investors often flock to the yellow metal to stabilise their portfolios. Holding a small quantity of gold can be considered as the intrinsic value of gold remains intact. You can also choose to have an exposure to gold through ULIPs. ULIP funds invest in a variety of asset classes and some fund options also have a small exposure to gold. You can choose fund options with gold to have a small and indirect investment in gold.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

The government has allowed all central government pensioners to open a joint account with their spouses.

Vesting date or age signifies when your pension plan’s accumulation phase is over and the distribution phase can begin. For example, in a deferred annuity plan, you may have a vesting date which is 10 to 30 years away depending on your age at entry. You will continue to invest or stay invested till the vesting date. After the vesting date or age, you can start receiving the pension or withdraw the money from the plan.

The steps may differ from plan to plan. However, you can buy the online retirement plans following the steps below:

  • Retirement Calculator: Use a retirement calculator to estimate your corpus need and expected monthly investment amount to achieve it
  • Choose Plan: Select the online retirement plan you want to start investing in
  • Contact Information: Fill in the personal details including the contact information. Make sure to put the correct e-mail ID which you can access since all future communication about the policy will take place via e-mail.
  • Define Your Investment: Select the goal, investment term, investment frequency and amount you want to invest (based on the calculator estimate)
  • Select Fund Allocation: Online retirement plans give you the option to invest in multiple assets including equity funds. You can select the ratio in which your premium will be allocated to these funds as per your risk appetite. Then select one of the portfolio rebalancing strategies.
  • Select Withdrawal Plan: You can withdraw money based on set milestone or systematically from the plan after the lock-in period. Select the options for withdrawal as per your plan.
  • Review Plan & Investment Details & Complete the Application Form

You can pay the premium amount before or after completing the application form to start investing.

The best time to plan your retirement is when you are planning your career. However, this may not be the time when you really start investing money for your retirement. You must start investing in your retirement plan as soon as you start earning.

Retirement is the only financial goal you cannot repair with other means of funding like a loan. Thus, developing the habit of investing with every income you have is the best way to have a comfortable retired life.

Insurance allows your family, especially your dependent spouse to continue living without financial worries if anything happens to you. Also, insurance may help you save enough for retirement in case of permanent disabilities. Additionally, life insurance retirement plans allow you to build a good retirement corpus with bonus additions.

Yes, you can change the nominee of the policy anytime you need. If you are using an Electronic Insurance Account (EIA) to manage your policies, you can change the nominees anytime from this account. Otherwise, you can contact the customer care to update the nominations on your policy.

You can opt for auto-debit of the premiums from your savings account. You can also pay the premiums online using your debit card, credit card or a payment wallet.

You can get Rs. 1 Core pension plan using the online retirement calculator. The calculator will assess your eligibility and provide you with the probable monthly or annual investment to achieve the goal. If the amount seems feasible you can complete the purchase online or set an appointment for a qualified advisor to help you in the process.

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