Pension plans are helpful for your retirement needs. It helps you save more money for the future either through a lump sum amount (one-time) or regular payments over a specific duration. These plans guarantee steady income all throughout your retirement, helping you securely live out your sunset years. There may be some exceptions with market-linked plans, where the returns can vary.

However, what is the best pension plan in India for your needs? This is where you need to invest a little time and effort into comparing multiple plans on the basis of several parameters before making a final decision. 

Key Aspects of Pension Plans

The best pension plan in India will naturally have these basic components: 

  • Offers a fixed sum of money each year throughout your lifetime as an annuity, either deferred or immediate. 
  • There will be a sum assured which is a pre-fixed amount offered to your nominee at the conclusion of the plan tenure. It is mostly 10-15 times of the annual premium or the policy’s fund value. 
  • The vesting age should be set conveniently after retirement, i.e. when you start getting this monthly pension from the plan. 
  • The payment period should be carefully checked, i.e. the duration when you will get these payouts after retirement. This should ideally be for your entire lifetime. 
  • The accumulation period will be when you pay regular premiums for the policy in question. 
  • The surrender value of the plan will be the amount paid by the insurer in case you surrender he same prior to maturity. 

Types of Pension Plans

What is the best pension plan in India for you? It is hard to say, since a lot of it has to do with your own requirements. Here are some types worth noting: 

  • Deferred Annuity- You can accumulate your retirement fund with single premium or regular payments. Pension is given after the completion of the policy period. 1/3rd of the amount is tax-free upon withdrawal, while about 2/3rd will be taxable. The amount is locked and cannot be withdrawn until you reach the age of retirement. 
  • Immediate Annuity- This gives you regular income just after you pay a lump sum for the policy. Premiums are tax-exempted while the nominee will get the money in case you pass away during the policy period. But there may be exceptions under some circumstances.
  • Annuity Certain- You will get annuity for a particular number of years and in case you pass away before getting all the payments, the annuity will be given to your nominee/beneficiary. 
  • Guaranteed Period Annuity- This enables annuity payments for particular durations like five, ten, fifteen, and twenty years. You will receive the annuity, irrespective of whether you survive this period or not. 
  • Life Annuity- These plans offer regular pension throughout your lifetime and it can be transferred to your spouse in the event of your demise. 

Some other types include pension funds, whole life ULIPs, defined contribution, and defined benefit. 

How to Select the Best Pension Plan 

When it comes to choosing the best pension plan for your needs, keep these aspects in mind: 

  • The returns from the plan should be sufficient to cover your needs after retirement. 
  • You may find it better to choose a plan that offers guaranteed returns, without any market-linked fluctuations. So, guaranteed pension may be a good option, along with ensuring that it is provided to your spouse in case of your demise. 
  • Choose a plan where you can flexibly increase your premium/monetary contributions through regular top-ups. Also look for premium payment flexibility (monthly, yearly, or half-yearly), and multiple options for payouts. 
  • Check whether there are any bonuses for remaining invested in these plans, along with additional benefits. These may add to your overall returns and help you amass a bigger retirement corpus. 

Thus, keep these pointers in mind en route towards selecting the right pension plan for your golden years.