Finances and their maintenance is a practice that most earning individuals have to become well-versed with in order to sustain themselves at a time when living costs are increasing exponentially. This practice is honed by people in different ways, most often determined by their monetary needs. For a young earning individual the goal may be to grow their capital for more investments, but for a middle-aged person it may be driven towards post-retirement financial security.
Post-retirement financial security can be determined by choosing investment instruments that provide long tenures and extended coverage. When an individual is in the pursuit of understanding what is investment, the foremost determinant is the need for coverage and to prepare for a future. Pension plans are important and commonly invested in, as they have high demand in the service industry for people who depend on their steady salary and employment benefits for coverage and meeting expenses.
Pension plans are investment instruments that can be utilised by potential investors to fixate a certain portion of their income towards their foreseeable future; preferably maturing into a sizeable corpus at the time of their retirement from the workforce. The best pension plans in India are considered an essential investment, as after retirement they are no longer on a company’s payroll and their regular income which they use to support their financial obligations may be disrupted.
Pension plans are necessary, as retirement can be a vulnerable time. The most important factor that one has to consider before retirement is the way their financial situation will be affected after retiring. Since household expenses and liabilities such as loans are non-negotiable; one has to be conscious of a solution that will allow them to support these expenses well after retiring. The best pension plans in India are tailor-made to offer coverage that is adjusted for inflation and prolonged coverage with maturity benefits that are accessible to everyone.
Now that the basic of pension plans have been established, let us read through various features that are offered under pension plans in India:
- Income Replacement: The goal of a pension plan is to stabilize a retiree’s financial situation after they are no longer on a company’s payroll and don’t have employment benefits. In these situations, a pension plan is a necessity as it supports the investor through all expenses even in the absence of a salary. It is especially important as gives the investor financial support for medical expenses, as they are more prone to frequent illnesses and diseases at an older age.
Through features such as annuity and assured sum benefits, a policyholder is able to earn a steady pension from their plan and is able to meet all their expenses.
- Tax Benefits: Since pension plans are identified as essential and universal assets for earning individuals, they are exempted from taxation under Section 80C of the Income Tax Act, 1961. Since there are various types of pension plans in India, the tax deductions, eligibility and limit for each are covered under the Section 80C, 80CCC and 80CCD.
- Vesting Age: Vesting age is a requisite under pension plans which details the age at which a policyholder starts to receive their pension. Most plans have detail their vesting ages to start at 45 or 50, but there are provisions offered by many policy providers who allow they age to be shifted up to 70 or even 90.
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- Policy Tenure: Policy tenure, as specified under most investment and insurance plans is the time period for which the policyholder continues to invest in their fund; most commonly through recurrent premium payments. This duration is determined at the time one purchases the policy, where for pension plans it is usually longer than other investment instruments. The best pension plan in India will offer anywhere between 25 to 30 years of a policy tenure for ideal corpus growth and coverage.
- Payment Duration: Different from policy tenure; it is the duration for which a policyholder receives pension payments from their provider. For pension plans, the payment period starts after retirement where they begin to receive pensions as an income replacement. Therefore if an investor begins receiving their pensions at the age of 60, and their policy ends when they turn 80; their pension plan payment period is of 20 years.
- Surrender: One may have to surrender their investments and insurance plans for various personal reasons, which is why insurance providers allow them to exit a policy when they require funds or cannot support it. To surrender a policy is not a wise decision, since an investor may lose their investment benefits.
For pension plans, the usual requisite is that they can surrender their plan after a minimum tenure has elapsed, and the premiums through the same have been duly paid. As aforementioned however, they risk losing all pension plan benefits under their specified policy.
Since the prospect of retirement and preparing for it can be a challenging and daunting process, one can seek the help of financial advisors over at Max Life Insurance and choose from the variety of plans offered by them; suited to fulfil all your post-requirement needs and goals.
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