Types of Retirement Plans in India

Retirement is basically a life stage when you hang up your boots at work and enter a relaxed phase. There’s no more stress to meet that deadline, manage the team, or run behind any office-related hassles. It opens up a lot of time for you to actually pursue what you once left to fulfil your responsibilities. However, many retirees require a strong financial backup to spend their golden years comfortably.

Now, this is one of the reasons that makes retirement planning so essential. Today, we’ll explore its different types, their benefits, and what you can do to plan it even better.

In recent years, India’s population has seen a shift in its percentage of the elderly. They are expected to reach 34.7 crore by 2050. This increasing number is a strong indicator of the importance of being aware of retirement plans and how they work.

These plans are basically financial tools that help you save during your earning years so that you receive a regular income after retirement. It works as your personal income replacement system once your monthly pay cheques stop.

You contribute a specific amount either once or regularly, and that amount grows into a corpus over time. This corpus is then used to provide you with income through fixed payouts or annuities during your retirement years.

Investing in such plans is highly important because they offer security, stability, and peace of mind. With life expectancy increasing, having a structured plan ensures that post-retirement years remain free from financial stress and full of comfort.

There are many ways to build a financial cushion for retirement. Each type of plan serves a specific purpose and caters to different comfort levels, needs, and lifestyles.

The following are some of the options from which you can select the one that fits your long-term vision: 

Pension Plans:

A pension plan provides you with a steady stream of income after retirement. You invest during your working years, and once you retire, the accumulated amount begins to provide you with regular payouts.

There are two broad categories of pension plans:

• With Cover: A with-cover pension plan includes a life insurance component along with the investment benefit. This means the nominee receives a death benefit in case of the policyholder’s unfortunate demise during the policy term. It ensures that your family are secure financially. Such plans are suitable for individuals who wish to combine income stability with life protection.
• Without a Cover Pension Plan: A without-cover pension plan focuses entirely on building your retirement corpus without providing a life cover. The full premium is invested to grow your savings, which then becomes your income source after retirement. These plans are suitable for individuals who already have separate life insurance and wish to focus solely on wealth creation for their retirement years.

Annuity Plans:

Annuity plans help you convert your accumulated retirement savings into a guaranteed income for life. They are ideal for individuals who want predictable monthly earnings after they stop working. The primary goal of an annuity plan is to ensure that you never run out of money during your retirement years.

The following are the two main types of annuity plans available, each serving different financial needs:

• Immediate Annuity Plan: An immediate annuity plan begins providing income almost right after you invest a lump sum amount. It is ideal for those who are nearing retirement or have already retired and wish to start receiving a steady income without delay.
• Deferred Annuity Plan: A deferred annuity plan helps you accumulate funds over time before your income starts. You invest regularly or through a one-time premium during your working years, and once the deferment period ends, your annuity payments begin. This plan is suitable for people who still have a few years before retirement and want to build a strong income stream for the future.
  
  Some annuity options offer income for life, while others extend the benefit to your spouse even after your lifetime. Certain plans also return the original investment amount to your nominee, ensuring continued financial support for your loved ones. Another advantage is that it guarantees a fixed income regardless of market fluctuations.

Unit-linked Retirement Plans (ULIP):

Unit-linked retirement plans combine the benefits of market-linked investment and insurance cover in one. They help you grow wealth while staying

Protected in the following manner:

• Flexibility to Choose Funds: You can select from types of investment funds based on your comfort level with risk. ULIPs also allow switching between funds as market conditions change.
• Potential for Higher Returns: Over time, the power of compounding can significantly grow your corpus, helping you build a larger retirement fund.
• Customised Investment Strategy: For instance, Promise4Growth Plus allows you to select your investment approach, remain insured, and enjoy market-linked returns that align with your goals.

Guaranteed Income and Savings or Endowment-Based Retirement Plans:

Guaranteed income and savings, or endowment-based plans, are ideal for those who prefer safety and stability over market risk. They provide assured returns and life cover protection to help you plan a stress-free retirement.

Here is why these plans are worth considering:

• Ideal for Low-Risk Investors: People who prefer stability over market-linked fluctuations find these plans suitable for maintaining a steady income after retirement.
• Regular Income Flow: The guaranteed payouts can serve as a replacement for your salary, helping you easily meet your monthly expenses and medical costs.
• Lump Sum Maturity Option: Endowment-based plans also offer a lump sum benefit at maturity, which can be used for significant goals, such as a dream home, a child’s wedding, or further investments.

Other Types of Retirement Plans:

Apart from the above-mentioned retirement plans offered by insurance providers, there are several reliable government and employer-backed schemes available in India. They serve as a strong foundation for your retirement portfolio and can be combined with them for better stability and growth.

Here are a few such options that continue to support millions of retirees:

• National Pension System (NPS): The National Pension System is a retirement plan backed by the government. It allows you to invest regularly during your working years and withdraw a portion of it at retirement. The remaining amount is used to buy an annuity that provides a steady income for life.
  
  The NPS offers flexibility in choosing between equity and debt exposure and provides tax benefits on contributions. Its interest rate, ranging around 10% makes it a good supplement to other retirement plans, especially for salaried employees.
• Public Provident Fund (PPF): The Public Provident Fund is one of India’s most trusted long-term savings schemes. Backed by the government, it offers safety, decent returns, and tax benefits. The investment duration is fifteen years, but it can be extended in five-year increments.
  
  Interest earned via PPF is compounded annually, growing your corpus steadily over time. Since the returns are tax-free, it is a reliable option for conservative investors who wish to build a risk-free retirement fund.
• Employee Provident Fund (EPF): The Employee Provident Fund (EPF) is a mandatory savings plan for salaried individuals. Both the employer and the employee contribute a part of the salary to the fund every month. Over time, this accumulates into a significant amount that can be withdrawn upon retirement.
  
  While EPF forms a strong base for retirement savings, it may not be enough to meet long-term expenses or healthcare needs. This is why it is wise to complement EPF with private retirement plans that can help fill the gap and secure your lifestyle more effectively.

When you invest in the best retirement plan, you invest in peace of mind and self-reliance. Each retirement plan may work differently, but all share one goal, which is to help you maintain financial independence throughout your post-retirement years.

Below are two key benefits of retirement plans:

• Protection against Inflation: Regular income or market-linked growth helps keep pace with inflation so that your lifestyle remains comfortable.
• Legacy Planning: Some plans offer options to leave a financial legacy for your loved ones, helping you secure their future even after your lifetime.

With numerous choices available, selecting the right plan can be a challenging task. The process becomes simpler when you define your financial priorities clearly through a systematic approach as follows:

• Define Your Goals: Think about what kind of lifestyle you want after retirement. Whether it is travelling, supporting your children, or simply living comfortably, your goals determine the kind of plan you need.
• Understand Your Risk Preference: If you are cautious, go for guaranteed plans. If you can take calculated risks, explore ULIP-based options that may offer higher returns over time.
• Estimate Your Future Income Needs: Calculate how much you would need each month after retirement. Include household expenses, medical needs, and leisure activities.
• Diversify Your Savings: Do not depend on a single plan. Combine safe investments with market-linked options to balance growth and stability.
• Start Early: The earlier you begin, the more chances you have to grow your money. Even a small contribution made consistently in your thirties can double in value compared to one started in your forties.

Plan Today for a Peaceful Tomorrow

Retirement is your chance to live at your own pace and cherish every day without financial stress. Starting early ensures that your years ahead are as fulfilling as the dreams you once had.

At Canara HSBC Life Insurance, we understand that every retiree’s journey is unique. Our range of retirement solutions is designed to provide you with control, stability, and confidence in the years ahead.

Our expert advisors and online tools make it easy to estimate your retirement needs, choose the right plan, and track your progress. We believe retirement should be about enjoying life, not worrying about finances.

When you plan with us, you plan for freedom, comfort, and a future filled with confidence.