Written by : Knowledge Centre Team
2025-08-04
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8 minutes read
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India’s elderly population has been increasing steadily over the decades and is expected to reach 193.4 million by 2031 (according to projections by the Ministry of Statistics and Programme Implementation). In old age, most parents and grandparents in India depend on their children for everyday financial needs. However, with families becoming smaller and many working individuals staying away from home, there is an increased need to break this dependency through retirement planning and financial stability. A retirement plan is especially designed to meet your specific needs and is an ideal way to ensure you lead a stress-free post-retirement life.
Key Takeaways
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Why You Need a Retirement Plan?
A retirement plan is a long-term financial arrangement that helps you build a secure fund while you’re still earning, so you have enough money to live comfortably when you stop working. It acts as a safety net to cover daily expenses, medical needs and any unexpected costs that may come up in later life.
Having a proper retirement plan means you don’t have to rely solely on savings or family support; instead, you have a steady income stream to maintain your standard of living. With different plans available, from guaranteed returns to market-linked investments, you can choose an option that suits your income, goals and risk comfort.
Types of Retirement Plans You Can Choose FromPlanning for retirement isn’t one-size-fits-all. Different people have different needs, risk appetites, and goals for their golden years. To help you build the right financial cushion, there are various retirement plans you can choose from. Each plan type offers unique benefits and features, so it’s important to understand how they work before making a decision.
- Unit Linked Insurance Plans for Retirement: Unit Linked Insurance Plans (ULIPs) combine investment and insurance in a single product. When you choose a ULIP as your retirement plan, a part of your money is used to provide life cover, while the other part is invested to build a corpus for your retirement. ULIPs are market-linked products, which means the returns are not guaranteed and depend on how the underlying funds perform. Fund performance is subject to market risks, so it is important to review your investment regularly and choose your funds carefully. After you retire, the accumulated funds can provide a regular pension. ULIPs generally invest the policyholder’s money in safer assets like bonds to reduce excessive volatility in returns. However, some unit-linked pension schemes also offer the option to invest in equity funds for potentially higher returns.
- Guaranteed Savings Pension Plans for Retirement: Investing in a pension plan is a wise decision to build up a retirement corpus that can be used to provide a steady, post-retirement income. Guaranteed savings pension plans are designed for individuals who prefer low-risk investments with assured returns. These plans typically offer a fixed maturity value or guaranteed vesting benefit, which means you know exactly how much you will receive at the end of the policy term
Such plans often include a small element of market participation. For example, some may invest partly in equity or debt instruments, but with safeguards to protect your capital. They usually require you to pay regular premiums over a set period, after which you receive a lump sum or regular payouts in the form of a pension.
Guaranteed savings pension plans are especially suitable for those who want to secure their retirement income without worrying about market fluctuations. They can help you plan for essential expenses, medical needs and day-to-day living costs during your retirement years. - Mutual Funds for Retirement: Some mutual funds offer government-approved pension plans, which essentially function as a balanced fund with a 40:60 equity-debt asset allocation. However, unlike unit-linked schemes, these plans offer investors a single fund option. If you start contributing early to your retirement plan, you can build a substantial corpus for your post-retirement life. A retirement plan or pension scheme can help provide a guaranteed, regular income after you retire.
Key Things to Consider Before Choosing a Retirement Plan
Before you decide which retirement plan works best for you, it’s important to evaluate a few essential factors:
Your Current Financial Situation: Understand your income, expenses, and existing savings. This will help you decide how much you can comfortably set aside for retirement every month.
Risk Appetite: Some plans, like ULIPs, invest in equity and carry market risks. If you have a low-risk appetite, you may prefer guaranteed pension plans or government-backed schemes.
Time Horizon: The earlier you start, the better it will be. Starting in your 20s or 30s gives you more years to build a larger corpus through the power of compounding.
Tax Benefits: Different plans come with different tax exemptions under the Income Tax Act. Make sure you understand how each plan affects your taxable income.
Payout Options: Consider whether you’d prefer a lump sum, a regular pension, or a mix of both. Some plans allow customisation to match your retirement goals.
Important Terms to Know
Before you finalise a retirement plan, it’s useful to understand some key terms that often come up. Knowing what these mean will help you compare plans, read the fine print, and make well-informed decisions for a secure retirement.
Accumulation stage: The accumulation stage of a retirement plan is the time when the money invested in the plan earns returns. The accumulation stage is more pronounced in the case of deferred annuity plans, which pay out a regular pension after a few years of premium payment. The accumulation stage starts with the payment of the first premium.
Vesting Age: The age at which a retirement plan starts to pay the regular pension is known as the vesting age. Most pension schemes have a minimum vesting age of 45 to 50 years, but some plans allow the vesting age up to 90 years.
Liquidity: Retirement plans are long-term products and do not encourage withdrawals at the accumulation stage. Some plans, however, permit partial withdrawals to help investors take care of urgent liquidity needs. It is not advisable to utilise retirement funds for other uses, though.
Surrender value: If someone chooses to discontinue the plan midway, the company pays a surrender value according to the total amount of premiums paid. However, one should not discontinue a retirement plan as it leads to a loss of the sum assured as well as the life cover.
Conclusion
Retirement planning should ideally start when one is young and not be left until old age. Regular contributions over the long term can result in the accumulation of substantial funds for retirement. While the above-mentioned plans do offer tax-saving benefits, tax efficiency is an important factor to consider. Besides ensuring a regular income after you retire, investing in a retirement plan can also help you save taxes. Retirement plans can help you lead a respectable and dignified life in your later years. If you are looking for reliable options to secure your future, you may explore retirement plans from Canara HSBC Life Insurance.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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