Best Pension plans in India for 2013
Retirement planning is important for every individual. While you move to you older age, your income would reduce to zero, but your expenses would shoot up. Hence it is important for you to plan for your retirement ahead of time while you are earning money. Pension plans would provide an option for the individual to live independent life after his/her retirement.
Pension plans in India
Pension plans is one of the good investment option which provides regular income after your retirement. Insurance companies in India offers pension plans which also provides lump sum amounts at periodic intervals along with providing fixed income after retirement.
Types of Pension Plans in India
Though there are various types of pension plans in India, they can be broadly categorized in two main categories.
- Deferred annuity Plan: Most of the pension products sold by insurance companies in India are deferred annuity plans. Under deferred annuity plan, an individual need to invest a fixed amount regularly and the payment to him would not be done immediately. The amounts would get accumulated till the end of the retirement and would be paid. The payment method depends upon the annuity plan selected. The plan can be either to pay a maturity amount during retirement + after retirement a fixed pension would be paid through out the life or a fixed amount would be paid after retirement through the life.
- Immediate annuity plans: Under these immediate annuity plans, an individual need to invest a lump sump amount in the insurance plan and he would start getting immediately the fixed return at regular intervals throughout the life. Here an individual need not wait upto retirement, it would start from day one once he makes the payment.
Advantages of investing in Pension plans:
- Investing in pension plans early ahead of retirement would help an individual to invest smaller amounts.
- Individual would get regular fixed income after retirement to take care of expenses after retirement.
- Pension plan provides an individual to live independent life without depending on children.
Drawbacks of Pension plans in India
- Low returns: In India, deferred pension plans provide low returns comparing to other investment options like Bank fixed deposits, mutual funds, direct stock market investments, PPF, NSC etc., which provides higher returns. So, if you are looking this solely as investment option, better stay away from this.
- No guaranteed returns for annuity: Majority of the insurance companies would not tell you how much you would get as pension amount after your retirement. They may indicate 4% to 5% returns on your investment amount, which would show very low annuity.
- No full withdrawal: Under pension plans, you can withdraw only 1/3rd of the pension plan amount after retirement. Balance would be invested in annuity plan and you would get pension amount. In case you have any pressing needs and want to withdraw full amount during retirement, it is not possible.
Best Pension plans in India for 2013
- Jeevan Akshay-VI from LIC (Immediate annuity plan)
- New Pension Scheme (Deferred annuity plan)
Conclusion: Investing in pension plans in India has advantages as well as drawbacks. If you are looking this option only for the purpose of investment, you better stay away from this. You can invest in other best investment plans like Mutual funds, Investments in Stocks, Bank Fixed deposits, PPF, NSC etc., which provides higher returns. Once you have accumulated good money, you can go for immediate annuity pension plans where you get regular fixed income.
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Best Pension Plans in India