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Top 5 Saving Plans in India for Retirement

dateKnowledge Centre Team dateJanuary 27, 2021 views112 Views
Top 5 Saving Plans in India for Retirement

You must be aware of your financial goal before looking for a savings plan to invest your money for securing your life goals. The same scheme does not suit everyone as one might be looking to invest for retirement benefits or maybe for a child's education. You can evaluate the plan based on the common set of parameters to finalize the best plan.

Given is a list of things that can help you choose the perfect plan for your financial goal.

  • Risk appetite: Before investing in any plan, objectively analyze your risk appetite. If you are in the middle of your career and are already endowed with some financial obligations, we advise you not to take excessive risk with your investments. You may choose traditional endowment plans that have money-back guarantee clauses. People who are starting their career and are in their 20s and 30s may try to take higher risk. Younger people can opt for ULIP (unit-linked investment plans) that give market-linked returns but carry substantially higher risk.
  • Investment tenure: Investment tenure is an important aspect to consider before investing. If you save for your retirement, ULIPs, which multiply your savings in the long-term, is a perfect product. While one should consider the investment tenure, the flexibility to change the investment duration should also be considered. Most savings plans provide an option to change the premiums and the investment amount according to the policyholder's convenience.
  • Investment goal: As mentioned earlier, you should not forget the primary reason for the investment. If you aim to save for your retirement then find a savings scheme specifically designed to accumulate a retirement corpus, of your choice.
  • Features: Insurance companies offer a host of additional features, so read the policy document thoroughly and make an informed decision after considering all the features. In most investment plans in India, you are allowed partial withdrawals from savings plans to meet emergency liquidity needs. You can also apply for loans and life insurance with some savings plans. The Guaranteed Saving Plan from Canara HSBC Oriental Bank of Commerce Life Insurance provides life cover for the entire term. At the same time, you have to pay the premiums for a limited period.
  • Charges: When you buy a savings plan, various charges are held over the premium amount. Low charges automatically add up to your investment, so the best savings plans have minimal administrative charges. With the Invest 4G plan, you can get back the mortality charges on the plan's maturity. The policy also offers loyalty additions and wealth boosters, which indirectly lower the savings plan's final cost.
  • Amount of benefit.

    a. Long tenure (20-30 years)

    b. Money is locked in, i.e., it cannot be withdrawn before the expiry of the plan term

    c. The plan will become paid-up if the investor pays the premium for a minimum of three years and after that stopped.

  • Term Insurance

    Term insurance or term life insurance plans provide aid during the breadwinner's hour of crisis/ death.

    Cheap/ easily affordable plan can be bought online, hence reducing the hassle.

    It allows the investor to choose from two death benefits option:

a) In case of the insured's death during the tenure of the plan, the sum assured is paid to the nominee.

b) In case of the insured's death during the tenure of the plan, the sum assured and an additional death benefit is paid to the nominee.

  • The company assigns a personal claims manager's service to help the family during the claim management.

Unit Linked Insurance Plans are insurance plans combined with mutual funds. The premium paid by the insured is held in a corpus which is then invested in stocks and shares of different companies operating in the capital market. The ULIPs thus promise good returns linked to the market and also insurance coverage.

  • The premium is invested in a choice of funds offered by the company. Some basic funds offered are equity funds, debt funds and balanced funds, each representing a different risk criterion.
  • Premiums are locked in for five years after which partial withdrawals are allowed from the fund value.
  • Switching options are available, which enables the policyholder to switch his investment between funds.

Group Insurance plan- Generally, employers pay for the premiums of group insurance plans. The best part about group insurance schemes is that they are not limited to companies and their employees. For the employees:

  • Benefits with Default cover, i.e., having insurance cover.
  • The employer's premiums are generally paid as an incentive for employees, making them a default option for many people.

For the employer:

  • The premiums paid for group insurance policies are eligible for tax exemption under relevant sections.
  • Group insurance plans are cheaper than individual plans for the same number of employees.
  • Providing group insurance cover increases employee retentivity and boosts loyalty for the employer.
  • An added security of group insurance helps employees remain stress-free and focus on the task at hand.

5 Best Saving Plans in India

1) POS- easy Bhima Plus: An individual, non-linked, non-participating, saving cum protection plan offered by Canara HSBC Life Insurance company.

Benefits

  • In case of accidental death, the plan provides a double life cover.
  • The plan also provides a survival benefit. The policyholder gets paid the return of the total premium if they survive by the end of the policy's maturity.
  • The insured get different choices for premium payment and policy terms.
  • The plan comes with tax exemption benefits.
  • However, the policyholder can not avail any loan facility under this plan.

2) Pension4life Plan: Canara HSBC Life Insurance offers a Pension 4Life Plan for you to be independent in your retirement days. The plan is a non-participating general annuity product. The policyholder gets the desired level of annuity instalments in exchange for the purchase price of the policy. It is designed for an individual and is non -linked.

Benefits

  • Immediate/ deferred annuity options
  • Incentives for higher sum assured
  • Maturity benefits don't apply to this plan
  • Loan facility can be availed on the policy
  • There is a loyalty booster option for existing company's customers. The annuity rate gets increased under this.
  • The annuity rate is increased by 2% if the policy has been bought online.
  • If the policyholder is diagnosed with any critical illness, s/he is provided with immediate life annuity with return of purchase price.
  • In case of accidental total or permanent disability, the insured gets immediate life annuity with return of purchase price.

3) Guaranteed Income Advantage Plan: A non-linked individual and non-participating life insurance plan. The plan provides life protection and acts as an investment. The plan can also help you meet your short and long-term goals.

Benefits

a) Pay the premium for the limited-term and get life cover for the entire term.

b) Tax benefits are provided under the plan as per section of the Income Tax Act, 1961.

c) The policyholders get a higher premium booster.

d) Guaranteed benefits are paid on maturity of the policy if the policy premiums are paid on time.

f) The policyholder can cherish the loan facility on the policy.

4) Guaranteed Income Plan: The plan provides its insured with guaranteed money back payouts with life insurance. It is designed as an individual, non-linked and non-participating plan, which acts as insurance cum investment.

Benefits

  • The policyholder gets survival benefit under the plan A guaranteed annual cashback is provided at the end of the last four policy years before the policy maturity.
  • The benefit is provided if all the premiums have been paid under the policy.
  • In case the insured survives tilt the policy term, they get:
  • Guaranteed Sum Assured on Maturity Guaranteed Yearly Additions Guaranteed Loyalty Addition
  • The premiums can be paid on a yearly half-yearly, quarterly and monthly basis
  • The plan also provides the policyholder with a guaranteed single pay advantage option.
  • Loan facility can be availed on the plan after surrender value has been acquired.
  • The plan gets you the tax benefit for the paid premiums as per section 80C of the Income Tax Act 1961.

5) Easy Bachat Plan: As the name suggests, Easy Bachat Plan can help you make hassle-free savings. It is a non-linked and non-participating plan designed for an individual. There are two plans to choose from: an endowment plan or money back plan.

Benefits

  • The insured gets guaranteed benefits paid on the maturity of the policy.
  • The plan provides life cover for the whole term, and you need to pay the premium for a fixed time duration.
  • The insured is free to choose the most suitable premium payment options.
  • Guaranteed additional bonuses are provided at the end of the policy year.
  • The insured can avail of the income tax benefits on the paid premium and death/maturity benefits provided under the plan.

Canara Oriental Bank of Commerce Life Insurance company offers many more investment and saving plans. It is advised to read the documents carefully before investing in any plan and estimating the various risk factors.

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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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