{"id":877,"date":"2016-01-02T12:54:51","date_gmt":"2016-01-02T07:24:51","guid":{"rendered":"http:\/\/trucompare.in\/blog\/?p=877"},"modified":"2016-02-01T16:38:36","modified_gmt":"2016-02-01T11:08:36","slug":"top-retirement-plans-for-2016","status":"publish","type":"post","link":"https:\/\/www.trucompare.in\/blog\/top-retirement-plans-for-2016\/","title":{"rendered":"Best Retirement and Pension Plans in India"},"content":{"rendered":"

Best\u00a0Pension Plans in India<\/strong><\/h2>\n

\u00a0<\/strong>Retirement is a phase to enjoy freedom from work, engage in leisurely activities, pursue hobbies, embark on travel expeditions and basically do everything that you wanted to do but couldn\u2019t because of your active working years. But, to live a king-size life during your golden days, you need to start your retirement planning as early as possible.\u00a0 According to The Aegon Retirement Readiness Survey 2015<\/a>,\u00a0 Indian workers expect that they will need an average of 58% of their current income in retirement. However, they also believe that they are on track to achieve only 71% of the retirement income they need. Do you think you are on right track to financial planning for retirement?<\/p>\n

What you should focus is on creating a sound, well-balanced investment portfolio to meet your retirement goals. There are several investment products such as fixed deposits, stocks, mutual funds, life insurance, real estate, commodities and precious metals, among a few others available in India. However, pension plans are recently gaining popularity as they are specifically targeted to meet retirement goals. So, it makes a wise decision to allocate a certain portion of your investment towards pension plans.<\/p>\n

What are Pension or Retirement Plans?<\/strong><\/h2>\n

Pension plans are a type of investment product that encourages you to create a retirement account. That is, you can build a huge corpus over a period of time in order to receive a fixed payout when you retire.<\/p>\n

The pension plans broadly cover two phases:<\/p>\n

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  1. Accumulation:<\/strong> During this phase, you focus on making investment to accumulate the funds you need post retirement. This is the period between your current age and retirement age.<\/li>\n<\/ol>\n
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    1. Distribution:<\/strong> During this phase, you start withdrawing an amount to fetch a regular income from your retirement corpus. This period begins from your retirement age.<\/li>\n<\/ol>\n

      If a pension plan is taken from an insurance company (discussed below), you are entitled to an annuity<\/strong>. Annuities refer<\/a> to the stream of income an insurer pays at regular intervals to the investor until his death or\u00a0 at the end of tenure he may have opted for. The corpus at the end of the accumulation phase will be paid out in two parts – 1\/3rd in the form of lump sum, with the remaining will be converted into annuities.<\/p>\n

      Let\u2019s take an example of how annuity works. Shirish is a 35 year old IT professional who wants to retire at the age of 65. He invests Rs1 lakh per annum in a pension plan for a period of 30 years. The total premium he pays over 30 years is Rs30 lakhs. Assuming that his investment grows @8% per annum, his corpus will accumulate to around Rs93 lakhs by the time he retires. So, he can withdraw Rs31 lakhs as lump sum amount upon retirement and receive a pension of around 6 lakhs per annum as pension (annuity) from the balance 2\/3rd<\/sup> amount for the rest of his life.<\/p>\n

      The annuity based pension plans can be classified into two categories:<\/p>\n

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      1. Deferred Annuity:<\/strong> Here, you invest a fixed amount till your retirement age. The withdrawal or benefits will commence only upon attaining the retirement age.<\/li>\n<\/ol>\n
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        1. Immediate Annuity:<\/strong> Here, you invest a lump sum amount to commence annuity with immediate effect. Ideally, this is suited for those who are nearing the retirement age or prefer lump sum investment.<\/li>\n<\/ol>\n

          Types of Pension Plans<\/strong><\/h2>\n

          Surprisingly, for a country like India, where elderly population<\/a> aged 60 years and above is expected to rise from 77 million in 2001 to 179 million in 2031 and further to 301 million in 2051, there aren\u2019t still many pension schemes available. In fact, only 12% of India\u2019s workforce<\/a> is covered under government administered pension schemes.<\/p>\n

          Currently, there are following pension plans available in India.<\/p>\n

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          1. National Pension Scheme (NPS)<\/li>\n
          2. Traditional Retirement Plan<\/li>\n
          3. Unit Linked Pension Plan (ULPP)<\/li>\n
          4. Mutual Fund Linked Retirement Plan (MFLRP)<\/li>\n
          5. Employee Pension Scheme (EPS)<\/li>\n<\/ol>\n

            We will discuss each of the above pension plans in detail.<\/strong><\/p>\n

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            1. \n

              National Pension Scheme (NPS)<\/strong><\/h3>\n<\/li>\n<\/ol>\n

              NPS was launched in April 2004 by the government of India and regulated by Pension Fund Regulatory and Development Authority (PFRDA) to meet the following objectives:<\/p>\n