Benefits of Pension Plans

By -


Pensionplans or retirement plans offer you the dual benefits of investment and insurance cover. It is nothing but investing a certain amount regularly to accumulate over a specific tenure in a phase-by-phase manner. This will ensure a steady flow of monthly pension once you retire. Provident Fund, for example, is a popular retirement planning scheme.

If you begin contributing early, it will build towards a secure golden year money-wise. A well-chosen retirement plan can help you rise above inflation, thanks to the power of compounding. The corpus  in your name by the retiring age can take care of increasing healthcare costs and lifestyle requirements.

Benefits of Pension Plans
a. Guaranteed Pension/Income
You can get a fixed and steady income after retiring (deferred) or immediately after investing (immediate), based on how you invest. This ensures you a financially independent life. Use a retirement calculator for a rough estimate of how much money you might require monthly after retirement.


b. Tax-Efficiency
Pension plans are entitled to tax exemption specified under Section 80C. If you want to contribute to pension plans, the Indian Income Tax Act, 1961, offers significant tax respite under Chapter VI-A. Section 80C, 80CCC and 80CCD specify them in detail. For instance, Atal Pension Yojana (APY) and National Pension Scheme (NPS) are subject to tax deduction under 80CCD.


c. Liquidity
A retirement plan is essentially a product of low liquidity. But some companies offer pension funds that let you withdraw even during the accumulation stage. So, you will have funds to fall back on during emergency without having to rely on bank loans or borrow from other people.


d. Vesting Age
This is the age when you begin to receive the monthly pension. For instance, most pension plans keep their minimum vesting 40 or 50. It is flexible up to age 70, though some companies do allow the vesting age to be up to 90.


e. Accumulation Duration
The investor pays the premiums regularly or once in this period. This is when the wealth accumulates to build up a sizable corpus. For instance, if you start investing at the age 30 and continues investing till age 60, the accumulation period will be 30 years. Your pension for the chosen period essentially comes from this corpus.


f. Payment Period
Do not confuse this with accumulation period. This is the period in which you receive the pension after retiring. For instance, if one receives the pension from the age 60 to age 75, the payment period will be 15 years. Most funds keep this separate from accumulation period, though some funds allow partial/full withdrawals during accumulation periods too.


g. Surrender value
Surrendering one’s pension plan before maturity is not a smart move even after paying the required minimum premium. This results in the investor losing every benefit of the plan including the assured sum and life insurance cover.


Comments

Post a Comment

Popular posts from this blog

Which term insurance plan is best for you?

By -
  Which term insurance plan is best for you? In today's world, where things can be uncertain, making sure your family has enough money for the future is really important. That's where term insurance plans come in handy. They're an easy and not-too-expensive way to make sure your loved ones have enough money if something happens to you. If you live in Nagpur, it's especially important to pick the right term insurance plan, and having a trustworthy insurance agent or advisor in Nagpur can really help. In this article, we'll talk about the different types of term insurance plans available and help you figure out which one might be the best for your situation. Level Term Insurance: One of the simplest and most widely chosen types is level term insurance. With this plan, you pay a fixed amount of money for a certain period, like 10, 15, 20, or 30 years. Many people in Nagpur like this type because it's easy to understand. If you happen to pa
Read more

Six sip secrets you should know.

By -
  Six sip secrets you should know. Mutual fund investing has long been regarded as one of the best strategies for long-term wealth growth. Like many other Indian cities, Nagpur is seeing an increase in the number of people using mutual funds to reach their financial objectives. By using a systematic investment plan (SIP), you can invest in mutual funds in one of the most well-liked and convenient ways possible. However, there are a few SIP secrets that, when understood and used, can drastically affect the results of your mutual funds. We'll go into these six SIP secrets in this blog and examine how they can affect your financial journey, with a particular emphasis on Nagpur and the significance of a mutual fund advisor in Nagpur. Consistency is key - Systematic Investment Plans, or SIPs, encourage investors to make consistent, recurring investments. This methodical strategy makes sure that you invest a set amount of money at regular intervals, usually once a mo
Read more

Types of Systematic Investment Plans (SIPs)

By -
  Types of Systematic Investment Plans (SIPs) A systematic investment plan (SIP) is a common way for people to invest in mutual funds through a system that enables them to make regular, fixed-amount investments at predefined intervals. SIPs offer a disciplined approach to investing and come in a variety of forms to accommodate differing risk profiles and investment objectives. Individuals have access to a wide variety of SIP alternatives offered by various mutual fund firms in Nagpur, a city in Maharashtra, India. Let's examine some of the various SIPs that Nagpur has to offer. Equity SIPs: These investments in equity mutual funds, which invest largely in company stocks, are known as equity SIPs. These SIPs are appropriate for people who have a lengthy investing horizon and a higher risk tolerance. While equity SIPs may offer larger returns, they are also vulnerable to market volatility. Debt SIPs: Debt SIPs invest in debt mutual funds, which invest largely in fixed-income se
Read more