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Overview of Retirement Plans
Retirement planning is the most important goal of every individual and no one can ignore the importance of the same. Improved health facilities have resulted in longer life expectancy. At present life expectancy of an average Indian is around 66 years and is likely to increase progressively in future. The rising trend of nuclear family with no one to fall back upon has forced people to seriously think about planning for a sound retirement. This has to be addressed carefully at a younger age itself.
The government is also concerned about this issue and has launched NPS (National Pension System) which is offering tax benefits. IRDA is also trying to increase awareness of pension plans offered by life insurance companies
What are Retirement Plans
Pension plans also known as retirement plans are investment plans that enable you to set aside part of your income to accumulate over a period of time and provide you with steady income after retirement when your regular income stops. As a key earning member of your family you can only work for as long; at some point your income will stop and hence the need to secure your retirement lifestyle. By selecting the best pension plan you can get a platform that will let you use part of your current income for your post retirement living. With the ever increasing rise in cost of living, it is important that one should make adequate arrangements for living a comfortable life post retirement.
Features and Benefits of Pension Plans
Minimum Guarantee: Every pension plan needs to have a minimum guarantee. As per IRDA guidelines, there should be "on-zero returns" on all premiums or guaranteed maturity benefits. Most insurance companies guarantee a minimum of one percent of total premium over the complete policy term.
Tax Benefits: The final payout is provided in two ways. 33% of final pay out can be withdrawn in lump sum and is not taxable. However the rest of the amount is taxable.
Types of Pension Plan
In an immediate annuity plan, one has to deposit a lump sum amount and instantly, pension will start. It is further differentiated into following categories:-
- Annuity Certain
According to this clause, annuitant receives a fixed sum of amount for certain number of years; the annuitant can decide the period. In case annuitant passed away before expiring the term period, the annuity will be paid to beneficiary.
- Guaranteed Period Annuity
According to this annuity option, annuitant will receive annuity for the term period and after expiring the term period as well. During the policy term, if annuitant dies, then the annuity will be received by the beneficiary. Pension will continue throughout life only if annuitant survives.
- Life Annuity
Under this option, annuitant will get pension income regularly until death and in case annuitant selects ‘with spouse’ choice, then the pension amount will continue and be paid to the spouse after the death of annuitant.
It helps to build a financial corpus through regular or single premiums over a policy term. Pension will start when the policy term period is expired. The accumulated amount is consists of guaranteed additions, bonuses and sum assured and invested to build flow for regular income.
National Pension Scheme
Government has been launched New Pension Plan for those who want to build pension amount. Put your savings in new pension plan and then, it will be invested in debt market and equity as per your choice. At the time of retirement, you can withdraw 60 percent of total amount and remaining 40 percent is used to purchase annuity. You will not get tax benefit on the maturity amount.
Owing to the low front load charges, pension funds are a good way to accumulate corpus amount. Pension funds are meant for long term and hence perform better. PFRDA, the government body has allowed 6 companies as fund managers.
Pension Plans ‘with cover’ / ‘without cover’
Pension plan with cover includes life cover component. It implies that on the death of the insured, a lump sum amount is received by the family members although the cover amount is not high as a large part of premium amount is shifted towards developing the corpus instead of covering for life risk. Pension scheme ‘without cover’ implies that life cover is not included in the policy. Currently, deferred annuity schemes come with cover whereas immediate annuity schemes are available ‘without cover’.
Buy Best Pension Plan in India
Best Pension Plan is the one that offers the highest possible returns. To select the best pension plan in India, please get in touch with licensed insurance professional of Bimadirect who will be able to help you secure the appropriate retirement plan with good returns.