Do I need A Retirement Plan If I Already Have A ULIP?

2024-08-02

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Unit-Linked Investment Plans are a unique offering in today’s investment and insurance landscape, and companies are rolling out ULIPs to serve different goals for the buyers. People are now buying ULIPs as investments towards their retirement planning and life goals. But have you considered looking further to pension schemes after buying a ULIP? While ULIPs are great tools for retirement planning, pension plans have their own unique value proposition. Pension plans definitely deserve a consideration even if you already have a ULIP in place. Let’s see why.

Flexibility to customize your plan as per your Life Goal.
Return of Mortality Charges on Maturity under Benefit Option 1 (Life Option)*
Loyalty Additions & Wealth Boosters as additional allocation of units to boost your savings.
Choice of Investment Funds ranging from 0% to 100% equity exposure, to match your appetite towards investment risks and returns
Multiple Portfolio Management Options to enable you optimize returns from the Policy.
Liquidity option by way of partial withdrawals to help you meet unplanned contingencies.
Tax benefits on premium paid and benefit received during Policy term under Section 80C and Section 10(10D), as per the Income Tax Act, 1961, as amended from time to time.

What are Pension schemes?

Pension plans basically entitle you to regular and periodic disbursement in return for a lump sum amount or reimbursement of the premiums that you made through the policy term. There are various types of pension plans being offered in India today. Before looking at their benefits, let’s see what they are and what value proposition they make for you, the buyer.

Deferred Annuity In this structure, you pay a series of premiums to an insurance company in your working years. When you retire, you get a lump sum which can either be used completely to buy immediate annuity, or can be utilised partially. Some deferred annuity plans, even have inbuilt flexibility options to make additional contributions to your fund in the form of top-ups. Deferred annuity therefore lets you build your corpus during your working years and utilise it during retirement.
Immediate Annuity In this model, you make a lump-sum payment to your insurance company, which in turn, promises you a fixed flow of income over the coming years, as decided by the buyer. Immediate annuity plans help people channel all the savings of their lifetime towards regular flow of income after retirement. Most plans that offer immediate annuity provide growth benefits and usually, also come with insurance alongside.
Variable Annuity In variable annuity, your retirement funds are channeled towards various types of mutual funds for further growth. Variable annuity plans subject your funds to a higher risk in the hope of achieving higher returns. Another type of annuity plan that resembles this type is indexed annuity, where a part of your funds are channeled to a stock market index. Your regular payouts come from the rest of the funds, which result in a fixed payout.

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Both ULIPs and pension plans will help you save taxes. Under section 80C and 80CCC of the Income Tax Act, 1961, the premiums your pay towards ULIPs and pension plans are exempt from tax respectively - both are subject to an annual limit of 1.5 lacs per annum. On the other hand, while withdrawals under ULIPs are exempt from taxes (subject to Section 10D), pension plans do attract taxes on maturity. You can withdraw a third of your maturity amount without taxes and the rest can be used to buy immediate annuity for further tax planning

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.