Every individual has goals and liabilities that require large scale investments to be fulfilled. These can be financially exhausting for a person, where they may have to use funds from their savings to fulfil these goals, risking their future security in the process.Through financial planning one can rely on calculating, analysing, implementing and reviewing their income and investment practices in a manner that is targeted towards them fulfilling their expenses, financial goals, and liabilities while also securing funds for retirement or other long-term monetary needs.
The transition from being an active employee to a retired pensioner can be a difficult process. The anxieties around financial stability after a change in income patters are universal. Therefore, the government, insurance providers and employers mitigate these anxieties by presenting various types of pension plan and funds to the employee to use at and well after the time of retirement.
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Post-retirement financial security can be determined by choosing investment instruments that provide long tenures and extended coverage. When an individual is in the pursuit of understanding the various investment options and the best pension plan in India, the foremost determinant is the need for coverage and to prepare for a future. A pension plan is important and commonly invested in, as they have high demand in the service industry for people who depend on their steady salary and employment benefits for coverage and meeting expenses.
A pension plan is an investment instrument that can be utilised by potential investors to fixate a certain portion of their income towards their foreseeable future; preferably maturing into a sizeable corpus at the time of their retirement from the workforce. The best pension plan in India is considered an essential investment, as after retirement they are no longer on a company’s payroll and their regular income which they use to support their financial obligations may be disrupted.
A pension plan is necessary, as retirement can be a vulnerable time. The most important factors that one has to consider before retirement in the way their financial situation will be effected after retiring. Since household expenses and liabilities such as loans are non-negotiable; with the help of a retirement pension plan, one has to be conscious of a solution that will allow them to support these expenses well after retiring. Pension plans and funds in India are tailor-made to offer coverage that is adjusted for inflation and prolonged coverage with maturity benefits that are accessible to everyone.
Now that the fundamentals and importance of investing in a pension plan have been established, let us look at the various features and benefits of pension plans in India:
- Income Replacement: The goal of a pension plan is to stabilize a retiree’s financial situation after they are no longer on a company’s payroll and don’t have employment benefits. In these situations, a pension plan is a necessity as it supports the investor through all expenses even in the absence of a salary. It is especially important as gives the investor financial support for medical expenses, as they are more prone to frequent illnesses and diseases at an older age.
Through features such as annuity and assured sum benefits, a policyholder is able to earn a steady pension from their plan and is able to meet all their expenses.
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- Tax Benefits: Since pension plans are identified as essential and universal assets for earning individuals, they are exempted from taxation under Section 80C of the Income Tax Act, 1961. Since there are various types of pension plans in India, the tax deductions, eligibility and limit for each are covered under the Section 80C, 80CCC and 80CCD.
- Vesting Age: Vesting age is a requisite under pension plans which details the age at which a policyholder starts to receive their pension. Most plans have detail their vesting ages to start at 45 or 50, but there are provisions offered by many policy providers who allow they age to be shifted up to 70 or even 90.
- Policy Tenure: Policy tenure, as specified under most investment and insurance plans is the time period for which the policyholder continues to invest in their fund; most commonly through recurrent premium payments. This duration is determined at the time one purchases the policy, where for pension plans it is usually longer than other investment instruments. The best pension plan in India will offer anywhere between 25 to 30 years of a policy tenure for ideal corpus growth and coverage.
- Payment Duration: Different from policy tenure; it is the duration for which a policyholder receives pension payments from their provider. For a pension plan, the payment period starts after retirement where they begin to receive pensions as an income replacement. Therefore if an investor begins receiving their pensions at the age of 60, and their policy ends when they turn 80; their pension plan payment period is of 20 years.
- Surrender: One may have to surrender their investments and insurance plans for various personal reasons, which is why insurance providers allow them to exit a policy when they require funds or cannot support it. To surrender a policy is not a wise decision, since an investor may lose their investment benefits.
To prepare for retirement and cope with a change in income can be a challenging and daunting process. To streamline the process, one can seek the help of financial advisors over at Max Life Insurance and choose from their range of pension plans; which are suited to maintain and fulfil all your post-requirement goals.
