Everything to Know Before Retirement

Best Retirement and Pension Plans in India

Planning for retirement is one of the most crucial financial steps for securing a comfortable future. In India, pension and retirement plans offer an excellent way to ensure financial stability post-retirement. With various options available, it can be challenging to choose the best one. In this article, we explore the best retirement and pension plans in India, including how to apply, eligibility, costs, features and age requirements to help you make an informed decision.

Understanding Pension and Retirement Plans

Pension and retirement plans are long-term financial products designed to provide regular income after retirement. These plans allow individuals to save systematically during their working years and enjoy financial security in their retirement years. They typically consist of two phases: the accumulation phase, where contributions are made, and the distribution phase, where the corpus is used to provide a regular pension.

Eligibility for Pension Plans

The eligibility criteria for pension and retirement plans in India vary based on the type of plan and the service provider. However, common eligibility criteria include:

• Age: Most pension plans are available to individuals aged 18 to 65 years. Some plans have specific age limits for entry, while others may allow anyone within the eligible age range to apply.
• Indian citizenship: These plans are generally available to Indian citizens, though some providers may offer them to Non-Resident Indians (NRIs) as well.
• Income level: While there is usually no income-based restriction on eligibility, having a steady income during the contribution phase is advisable to maximize the benefits.

5 Steps for Applying

The application process for pension and retirement plans in India is straightforward. Here’s a step-by-step guide:

1. Research plans: Start by researching the different pension plans available. Compare features such as the premium payment options, fund growth potential and annuity options to select a plan that fits your needs.
2. Select the right plan: Choose a pension plan based on your retirement goals, age, risk tolerance and income level. Decide if you want a plan with life coverage or purely an annuity-based plan.
3. Submit application: You can apply for a pension plan either online or offline. Most providers have easy-to-follow online portals. If applying offline, visit the nearest branch of the insurance or financial institution.
4. Provide documentation: The application will require documents like identity proof, age proof, address proof, income proof and passport-size photographs. Some plans may also require medical screening.
5. Pay premiums: After submitting the application and documents, you will need to make your first premium payment. The premium can usually be paid monthly, quarterly, semi-annually or annually, based on the plan you choose.

5 of the Best Retirement and Pension Plans in India

1. Atal Pension Yojana (APY)

The Atal Pension Yojana is a government-backed pension scheme aimed at the unorganized sector but is open to all Indian citizens.

• Eligibility: Indian citizens aged 18 to 40 years.
• Contribution: Contributions depend on the age of entry and the pension amount chosen. Contributions start as low as INR 42 per month.
• Pension amount: The scheme provides a guaranteed pension of INR 1,000 to INR 5,000 per month after the age of 60.
• Features: Government co-contribution for certain subscribers, guaranteed pension and tax benefits under Section 80CCD(1).

2. National Pension System (NPS)

The National Pension System is a voluntary retirement scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is one of the most popular and flexible pension plans in India.

• Eligibility: Open to Indian citizens aged 18 to 65 years.
• Contribution: Minimum annual contribution is INR 1,000. There is no upper limit on contributions.
• Pension amount: No guaranteed pension. The corpus is invested in market-linked funds, and the final pension amount depends on fund performance.
• Features: Offers a mix of equity and debt investments, tax benefits under Section 80CCD(1B) and flexibility in choosing pension fund managers.

3. LIC Jeevan Akshay VII

LIC Jeevan Akshay VII is an immediate annuity plan from the Life Insurance Corporation of India (LIC). It provides a regular pension immediately after making a lump-sum payment.

• Eligibility: Individuals aged 30 to 85 years.
• Contribution: A lump-sum payment is required. The minimum purchase price is INR 1 lakh (or INR 1.5 lakh for online purchase).
• Pension amount: The annuity depends on the amount of the lump-sum contribution and the annuity option chosen.
• Features: Multiple annuity options, lifetime pension guarantee and tax benefits.

4. HDFC Life Click2Retire

HDFC Life Click2Retire is a Unit Linked Insurance Plan (ULIP) designed to provide a retirement corpus through market-linked returns.

• Eligibility: Open to individuals aged 18 to 65 years.
• Contribution: The minimum annual premium is INR 24,000, with no upper limit.
• Pension amount: The pension depends on market performance, as this is a ULIP-based product.
• Features: No premium allocation charge, flexibility to choose between equity and debt funds and tax benefits under Section 80CCC.

5. SBI Life Saral Pension Plan

SBI Life Saral Pension Plan is a traditional, non-participating pension plan offering a guaranteed pension post-retirement.

• Eligibility: Open to individuals aged 18 to 65 years.
• Contribution: Premium amounts are flexible, and policyholders can choose between regular premium, single premium or limited premium payment options.
• Pension amount: Guaranteed at the time of policy inception, providing stability.
• Features: Bonus accumulation during the policy term, death benefit and tax benefits.

Features and Costs of Retirement and Pension Plans

Pension plans generally come with several key features and associated costs:

• Premium payment flexibility: Most pension plans allow flexible premium payments, either monthly, quarterly, semi-annually or annually. Some plans, like immediate annuity plans, require a lump-sum payment.
• Tax benefits: Contributions towards pension plans are eligible for tax deductions under Sections 80C and 80CCD of the Income Tax Act.
• Annuity options: Pension plans offer different annuity options such as life annuity, joint-life annuity (pension for spouse after the policyholder’s death) and increasing annuity.
• Guaranteed pension: Some traditional plans offer guaranteed pensions, while others like NPS provide market-linked returns without guaranteed payouts.
• Cost of premiums: Premiums vary widely depending on the plan and the individual’s age, health and lifestyle. For example, in a ULIP-based pension plan, part of the premium goes into investment, with charges for fund management and mortality.