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What Are Retirement and Pension Plans?

Retirement plan and pension plan are names you will hear commonly for saving plans designed to serve your post-retirement financial needs. However, the meaning of retirement plan could be slightly different from that of the pension plan.

Few examples of retirement plans are the Employee Provident Fund (EPF), New Pension Scheme (NPS), Public Provident Fund (PPF), etc. Whereas pension plans would be the annuity plans which will offer a monthly income from the invested money.

Retirement and Pension Plans

Types of Retirement & Pension Plans in India

1
Immediate Annuity

An annuity is payable immediately, as per payment frequency chosen, at a constant rate in arrears. Premium is paid in lumpsum at beginning of annuity plan.

These are pension plans more than investment plan for retirement. These plans are best used near or after retirement, once you have accumulated your retirement funds.

2
Deferred Annuity

An annuity is payable post Deferment Period, as per payment frequency chosen, at a constant rate in arrears. Premium is paid in lumpsum at beginning of annuity plan.

You can invest in multiple such plans to start your pension at or after retirement. Your investment continues to grow while you wait for the annuity to start in the deferment period.

3
With Cover Pension

This pension plan includes an insurance cover that entitles your dependents to a lump sum amount in case of an unfortunate event.

Such plans are best for you if your spouse is financially fully dependent on you and is younger than you.

4
Without Cover Pension

This plan pays out the corpus built till date to the nominees in case an unfortunate event. There is no life cover (sum assured) in these plans.

Due to lack of life cover benefit; this plan will only transfer the remaining corpus to your nominees upon your death.

5
Unit-linked Pension Plan

Your premiums are invested in a combination of stocks, bonds, & securities depending on your risk appetite, to build a corpus that is paid out at maturity.

These plans are great for long-term corpus growth. So, if your risk appetite and age allows for equity exposure use Unit-Linked pension plans to build your retirement funds faster.

Our Plans

With the spread of the internet, online insurance plans and policies have gained substantial popularity. Canara HSBC Oriental Bank of Commerce offers three online insurance plans— iSelect term plan, Invest 4G ULIP and Health First plan

Invest 4G Plan

Invest 4G Plan

8 funds and 4 portfolio strategies to invest

Loyalty additions and wealth booster

Return of Mortality Charge is available on Maturity under all three cover Options

Flexibility of switching between the fund options to take benefits of market movements or change in risk preference

Smart Lifelong Plan

Smart Lifelong Plan

Long term protection

Partial withdrawal

Auto funds rebalancing

Increase/Decrease of sum assured

Tax benefits

Secure Bhavishya

Secure Bhavishya Plan

Guaranteed maturity (Vesting) benefit

Unlimited Top-ups

Option to choose vesting age & premium payment term

Flexibile Premium Payment Modes

Loyalty Additions

Smart Monthly Income Plan

Smart Monthly Income Plan

Accumulate Lump Sum money through Annual and Final bonuses

Life Cover for 25 years

Option for loan flexibility

Get Tax Benefits#

Smart Future Income Plan

Smart Future Income Plan

Enjoy Life Cover for 25 years

Guaranteed Income and Bonuses

Option for loan flexibility

Get Tax Benefits#

Pension4life

Pension4life

Wide range of annuity options to choose from

Option to receive immediate or deferred annuity

Guaranteed lifetime income directly credited to your bank account

Option to receive regular payments for as long as you or your partner* is alive

Eligibility Criteria for Retirement & Pension Plans

Plan Name Entry Age Maturity Age Vesting Age
Invest 4G Life Option: 0 to 65 years

Care Option: 18 to 50 Years

Century Option: 18 to 65 Years
Life Option: 18 to 80 years

Care Option: 28 to 80 Years

Century Option: Up to 100 Years
Not Applicable
Smart Lifelong Plan 7 to 65 years Up to 99 years Not Applicable
Secure Bhavishya Plan 25 to 70 years Not Applicable 40 to 80 years
Smart Monthly Income Plan 18 to 55 years 43 to 80 years Not Applicable
Smart Future Income Plan 18 to 55 years 43 to 80 years Not Applicable
Pension4Life 45 to 80 years Lifetime Not Applicable

Retirement Planning Goals

Your retirement goal will differ from others depending on several factors involving your lifestyle and income during your employment years. Another factor which you should account for in your retirement goal is inflation.

The factor which makes inflation a strong factor to consider in your retirement goal is that it will affect your life during the later years. As you progress in your retired life, your chances of earning from employment reduce and so do your chance of correcting the investment mistakes.

Thus, the earlier you factor in inflation in your retirement goal the better. Other factors which will define your retirement goal are:

Factors Impact
Your expected retirement age A higher retirement age gives you more time to invest and grow your corpus. However, early retirement will give you less time to accumulate sufficient money. Also, you will need more money to sustain your extended post-retirement life.
Life-expectancy A higher-life expectancy extends your retired period. Thus, you will need a bigger corpus to sustain your living costs. Also, inflation will have a bigger impact.
Health condition Health condition and lifestyle affect your medical expenses at a later age or in post-retirement life. Poor health and unhealthy habits may increase your medical expenses post-retirement.
Current income Current income affects your lifestyle and overall living costs also, it defines the amount you can save now for your retirement goal.
Current age The current age is the factor which will define how much time you have until retirement, and how much of your today’s income should be your retirement goal.
Process of Planning for Your Retirement Goal

Retirement goal planning is a simple process. Retirement consists of two distinct financial phases – accumulation and distribution. The accumulation phase is when you are earning from employment and building your retirement pool.

In the distribution phase, you use the accumulated funds to replace your income from employment.

If you are 30 years of age and earning Rs. 10 lakhs per year, at the age of 60, your first year’s monthly income will look as given below:

at 10% of your income at 20% of your income at 25% of your income
Rs. 92,457 Rs. 1,84,915 Rs. 2,31,144

Disclaimer: Rate of return for the retirement funds has been assumed at 8% p.a.

This is assuming your annual income grows by 5% every year during your employment years. You will also withdraw your pension at a growing rate of 5% per year to account for inflation, until the age of 90.

You can also, look at these amounts as, “you can contribute a higher percentage of your annual income towards retirement to retire earlier.”

So, for the accumulation phase, your retirement goal may not account for your actual expenses, but only your rate of contribution.

How much should you contribute to your retirement?

The answer depends on your current age, expected retirement age and your contributions so far. Simply put, you can follow the chart below to decide ideal contribution for your financially healthy retirement:

Years to Retire Min. Contribution to Retirement Funds
30 or more 10% of annual income
20 to less than 30 20% of annual income
Less than 20 35% or more
Less than 10 90% or more

Assuming an ROI of 8% p.a. on retirement investments and the expected retirement age of 60

The less time you have, the higher your contribution has to be towards retirement. That is unless you already have a pool of funds available.

3 Reasons You Need to Start Planning for Your Retirement Today

People often delay planning for their retirement, owing to a false sense of having abundant time. However, the earlier you start retirement planning, the better!
Here are a few reasons you need to start planning right away

1.Cheaper when younger

Retirement plans offer dual benefits of insurance and investment. When you are young the body is less prone to diseases which reduces the risk for the insurer. Since insurance is a business of risk assessment, the premiums are lower for young policy buyers.

2.Compounding

When you leave an investment to accumulate for a long time, the interest earned on the original investment too starts to generate returns. This leads to rapid accumulation and the corpus grows exponentially. When you start investing early, compounding helps in multiplying the investment rapidly.

3.Course correction

All market-linked investments are inevitably risky. When you start investing early you have ample time to monitor the performance of the investment and make necessary portfolio adjustment. Canara HSBC Oriental Bank of Commerce Invest 4G plan allows investors to switch between funds without any extra cost.

Stages of Retirement Planning

Retirement planning is not a task of a few weeks, or even months. A satisfying and fulfilling life post-retirement requires several years of planning and implementation. Depending on your age, retirement planning can be divided into three stages.

1.Accumulation

In the first stage of retirement planning, you have to contribute regularly to the pension plan. The premiums have to be carved out from your monthly income. The corpus available at your disposal after retirement will depend solely on the number of contributions made to a pension plan during the accumulation phase.

2.Preservation phase

Your expenses will change dramatically with age. The change in lifestyle fuels an increase in expenses as one nears retirement. The preservation phase kicks in 10-15 years prior to retirement. In the preservation stage, you can make a better analysis of your post-retirement requirements. Taking the required fund in an account, conduct a thorough review of existing investments.

3.Distribution Phase

The distribution phase starts when your regular income stops. This is the final phase of retirement planning when the fruits of the decades-long labour ripen. In this phase, you begin receiving monthly income from the pension plan to support your post-retirement expenses.

Six Reasons to Plan for Retirement Today

Retire Richer

The more time you can give your money to grow, the better corpus you will have at retirement. Since you cannot move your retirement date too much, it’s better to start investing as soon as possible. Give maximum time to your money for maximum compounding to take effect.

Save More Tax

Investments to retirement plans and life insurance pension plans help you save tax every year under section 80C. With new regulations in place limiting the amount of investment to individual retirement plans to Rs. 2.5 lakhs, starting early is even more important. You can still build a formidable corpus without exceeding your tax-exemption limits.

Avoid Last Moment Rush

Correcting the gaps in your retirement corpus becomes difficult as you progress. If you avoid investing adequately in your retirement early on, you are likely to encounter gaps in your retirement fund goal. This gap will be difficult to fill when you are close to retiring, due to insufficient time. You can avoid this by starting now.

Offer Better Growth to Your Investments

All market-linked investments are inevitably risky. When you start investing early you have ample time to monitor the performance of the investment and make necessary portfolio adjustment. Canara HSBC Oriental Bank of Commerce Life Insurance Invest 4G plan allows investors to switch between funds without any extra cost.

Cheaper When Younger

Retirement plans offer dual benefits of insurance and investment. When you are young the body is less prone to diseases, which reduces the risk for the insurer. Since insurance is a business of risk assessment, the premiums are lower for young policy buyers.

Counter Inflation Shock Post-Retirement

Investing early on keeps your retirement fund pool account for the inflation and your income growth more efficiently. This in turn adds to the growth rate of your retirement portfolio, leading you to have sufficient funds at the time of retirement. You can start your pension without having to compromise on your lifestyle.

Benefits of Retirement & Pension Plans

  • Safe & Reliable Income
    Life insurance pension plans can offer the safest and most reliable long-term pension income.
  • Wealth Boosters
    Retirement plans like Invest 4G and Guaranteed Savings Plan add bonus units and return to long-term investor’s portfolios.
  • Loyalty Additions
    Another form of bonus additions to your portfolio if you stay invested for more than 10 years.
  • Automated Portfolio Strategies
    Use automated portfolio management to benefit from equity funds while you are busy at work.
  • Tax-Savings U/S 80C & 10(10D)
    Investment of up to Rs. 1.5 lakhs to life insurance pension plans is tax-deductible under section 80C. Maturity value or partial withdrawals are exempt u/s 10(10D)
  • High Liquidity
    You can withdraw funds without breaking or surrendering your pension plan in the times of need.

How to choose the right retirement and pension plan in India?

  • Start early: The earlier you start investing in ULIPs, the better as it gives ample time to the investment to multiply. As soon as you start working, start putting aside small amounts for retirement. Keep on increasing the contributions with the increase in income.
  • Equity option: Even though equities are volatile when compared to other asset classes, they generate relatively better returns. Studies have proved that equities tend to outperform other assets in the long run. Retirement plans being long-term investment products, even a small exposure to equity markets has the potential to generate significant returns. With Invest 4G ULIP, you can choose to have equity exposure ranging between 0% and 100%.
  • Option to diversify: When you are saving for something as important as retirement, it would be foolish to have disproportionately high exposure to a particular asset class. Equities generate decent returns but are also risky. Choose a plan that allows you to have exposure across asset classes. You can choose to invest in a single fund or a combination of funds through Invest 4G plan.
  • Vesting age: Choose a retirement plan with a vesting age that matches your requirements. If you plan to retire early, there are plans with vesting age starting at 40 years. On the other hand, there are plans with a vesting age of 85 years.

Factors to Consider while Buying the Best Retirement & Pension Plans

4 Steps for Retirement Planning

Retirement is the simplest goal to plan for if you follow the correct approach. Investing for a prosperous retirement is the only challenge with this goal. So, here’s how you can go about it to keep it simple and rewarding:

Step 1: Start By Saving At Least 10% of Your Income

Remember your pension income and success of retiring at your desired age depends on how much of your present income you save for your retirement goal. If you have 30 years to spare the best you can do under Indian economic conditions is to invest at least 10% of your take-home income towards retirement goal.

This should be a safe investment in long-term pension or retirement plans.

Step 2: Start Investing Small Amounts to Equity Funds

Start Investing Small Amounts to Equity Funds

If you have more than 10 years before you retire, start investing small additional amounts in equity funds. Best way to allocate your money to equity is through unit-linked plans, as you not only get the tax benefits, but you can also manage your portfolio risk automatically.

You should aim to increase this contribution to at least 5% of your annual take-home income.

Step 3: Add Long-Term Assets to Your Portfolio

Add Long-Term Assets to Your Portfolio

Adding inflation-linked assets like house property for rental purposes and gold will help you continue to enjoy the inflation-adjusted income, even after retirement. Although such investments may be less liquid, they are useful in the post-retirement emergency such as low pension corpus.

Step 4: Minimise Post-Retirement Tax

Minimise Post-Retirement Tax

Monthly pension from a pension plan is taxable as salary income. Thus, you should add more retirement plans which allow tax-free partial withdrawals, such as unit-linked insurance plans. This will help you reduce your tax burden post-retirement.

Diversifying your savings to multiple assets is essential to achieve an important long-term goal such as retirement.

6 Steps to Find the Best Retirement & Pension Plans in India

1
Vesting age

Choose a retirement plan with a vesting age that matches your requirements. If you plan to retire early, there are plans with vesting age starting at 40 years. On the other hand, there are plans with a vesting age of 85 years.

2
Equity option

Even though equities are volatile when compared to other asset classes, they can generate relatively better returns over the long-term. Studies have proved that equities tend to outperform other assets in the long run. Retirement plans being long-term investments have the potential to generate significant returns even with a small allocation to equity funds. With Invest 4G, you can choose to have equity exposure ranging between 0% and 100%.

3
Option to diversify

When you are saving for something as important as retirement, it would be foolish to have disproportionately high exposure to a particular asset class. Equities generate decent returns but are also risky. Choose a plan that allows you to have exposure across asset classes. You can choose to invest in a single fund or a combination of funds through Invest 4G.

4
Option for Additional
Bonuses

Bonus units or funds added to your long-term portfolio can propel your portfolio to grow faster. The best pension plans offer loyalty additions and wealth booster benefits to investors investing in a plan for more than 5 to 10 years. The longer you invest the better your benefits become.

5
Option for Automatic Portfolio Management

If you are investing in portfolios with elements of equity, you need automated portfolio management to check the risk on your behalf. This will allow you to benefit from market movement safely even when you are not paying attention to the investment.

6
Policy Surrender Charges & Valuation

Pension and retirement plans are investment policies with good cash values close to their vesting or maturity age. Also, often you need lump sum money close to retirement for paying-off any expensive debt or buying a necessary asset like a house.

Lower surrender charges will help you recover the maximum amount from the investment in emergencies. Although, you do not need to surrender the policy as you can borrow against it at much lower rates. But the borrowing value is directly related to the surrender value.

How To Use Retirement Calculator?

  • 1Submit Personal Information Choose your current age and expected retirement age. The calculator gives you a conservative option for selecting retirement age up to 60 years only. If you plan to extend your employment beyond this age, this investment plan will only leave you in a better position.
  • 2Enter Present Expenses & Savings Your present monthly expenses will define the amount of money you will need as a pension after retirement. If you have already started investing in your retirement or want to allocate an existing asset to this goal, enter the value of it in the current saving for retirement option. Lastly, you can select an expected rate of return on this asset.
  • 3Calculate the Goal & Required Investment Amount After the expense and existing asset information, you can press the calculate button to estimate:
    • Your monthly expense at the time of retirement
    • The retirement corpus you will need
    • The amount you need to invest every month to achieve these goals

Retirement Planning Guide for Working Women

You are doing multiple hats during a single day, and almost all of these hats are very important in your life. So, the best way for you to plan your retirement goal is this:

1. Keep it simple
Whether you can achieve your retirement goal or not, depends majorly on one factor and that is what portion of your income are you saving for retirement. If you have 20 to 30 years at hand before your retirement age, saving 10 – 20% of your annual income towards this goal would take you a long way.

2. Use Diversified Portfolio
Retirement is one of those goals where your satisfaction with your fund pool is directly proportional to the diversity of your investments. This also helps you to maximise your retirement savings.

3. Automate Everything
The second important step is to delegate regular things so that you don’t have to spend time on them. Use auto-debit facility to automate investing function. If you invest in unit-linked plans you can also use one of the automated portfolio management options to control your investment risk at all times.

4. Keep Your Money Invested
Retirement is not just a long-term goal; it’s a life-time goal, as you will need to ensure that your retirement funds last at least your lifetime. So, for the best results make sure your unused money is earning adequate interest at all times.

5. Use Life Insurance Plans
You have two types of life insurance plans. Although both will give you the benefit of section 80C savings, few plans will also give you tax-exempt partial withdrawal option. For example, you can withdraw your funds partially from Invest 4G ULIP after five years of investment with zero tax liability.

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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