What Is A Retirement Plan

What Is A Retirement Plan

In 2011, there were 104 million elderly people in India. The number would have increased substantially as the proportion of elderly people has been rising over the decades. Old age in India is symbolized by a dependency on one's children for daily needs. With the changing family structures, the dependency is leading to friction between family members. One can break the dependency through retirement planning and a retirement plan is an ideal product to ensure a stress-free post-retirement life.

These are some of the key features of retirement plans. The features broadly remain similar across retirement plans, but let us take a look at the types of retirement plans

Plans by insurance companies: Retirement plans can be a mix of investment and insurance. When you contribute to a retirement plan, a part of the money is used to provide life cover while the bulk of the contribution is used to build a corpus for your retirement. After retirement, the accumulated funds are used to provide regular pension to the investor. Retirement plans generally invest the policyholder's money into safer assets like bonds to avoid excessive volatility in returns. However, some unit-linkedpension schemes provide an option to invest in equity funds for higher returns. Insurance companies offer two types of pension plans traditional endowment plans and unit-linked insurance plans. Endowment plans generally invest in debt instruments like government securities to ensure the safety of investor's funds. Unit-linked insurance plans, on the other hand, offer the option to invest in debt or equity depending on the risk profile and return expectation of the investor.

Plans from mutual funds: 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 schemes offer a single fund option to investors

If you start contributing early to your retirement plan, you could build a substantial corpus for your post-retirement life. Some of the features of a retirement plan or pension scheme are.

Guaranteed pension: The defining feature of a retirement plan is the regular income guaranteed by it. Depending on the type of investment, you can get an income immediately or after retiring. A pension schemes ensures a steady and fixed income which can help you live a fulfilling post-retirement life.

Tax-efficient: Besides ensuring a regular income post-retirement, investing in a retirement plan can help you save taxes as well. The contributions to a pension schemes are eligible for tax deductions under Section 80CCC of the Income Tax Act, 1961. Investments of up to Rs 1.5 lakhs in unit-linked insurance plans qualify for tax deductions under the broader Section 80C of the Income Tax Law.

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, that payout 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 till 90 years.

Liquidity:While 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 utilize retirement funds for other uses though.

Surrender value: Most retirement plans are long-term products. 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


Retirement planning should be started when one is young and not be left for the old age. Regular contributions for a long enough tenure can result in the accumulation of substantial funds for retirement. The Invest 4G unit-linked insurance plan from Canara HSBC Oriental Bank of Commerce Life Insurance can help you lead a respectable and dignified life post-retirement. Invest 4G plan offers an option of 7 investment funds and four portfolio management strategies to safeguard the corpus in the later stages of investment.

Speak to an insurance specialist now!

Call BackCall Back Pay PremiumPay Premium