Is ULIP a Better Investment Option than the Traditional Pension Plan?

In order to fulfill the long-term and short-term financial goals of life, it is very important to make proper financial planning. However, while doing financial planning, people often ignore the important aspect of planning for post-retirement. In order to live the golden days of retirement in a relaxed and stress-free way, it is very important for individuals to create a financial cushion for future towards retirement planning.

In today’s day and age, there are different financial products available in the market, which help in the post-retirement flow of income. Even though there is a wide range of pension plans available in the market, ULIP investment plans are gaining huge popularity as a lucrative option of retirement income.

For a better understanding of the customers, here we have elaborately discussed how ULIP retirement plans are a better investment option than a traditional pension plan.

Higher Returns

One may think that a traditional retirement plan is a good way to save and invest, but here is the catch. In case of a  traditional retirement plan, the major investment is made in debt funds as it offers a guaranteed benefit as sum assured at the end of the policy term. Since the money is majorly invested in government securities, thus the returns of traditional retirement plans are less.

On the other hand, ULIP pension plan provides higher returns on the investment, as the amount is invested in equity and equity-related securities. Thus, it provides an opportunity for the individual to accumulate wealth for life after retirement.

Offers Option of Free Switches

Apart from providing higher returns on investment, ULIP retirement plans also offer the advantage to choose different fund options for investment. Moreover, it also offers the option of free switches of funds. So, if an individual has a low-risk appetite and does not want to invest in equity market then he/she can choose to invest in debt funds. Furthermore, if the market is performing well and returns on equity are much higher than debt fund, then the individual can make free switches of the fund.  However, before making a fund switch it is very important to know the right time to make a switch.

Tax Benefit

Unlike traditional retirement plan, ULIP plan offers a significant tax benefit to the investors. It offers the benefit of EEE (exempt, exempt & exempt). Under the ULIP investment plan, the premium paid towards the policy and the ULIP returns is tax exempted under Section 80C and 10(10D) of Income Tax Act, 1961.

Offers Flexibility

The ULIP investment plans offer flexibility to the policyholders. The insurance holder can withdraw the money anytime according to their suitability. Moreover, the insured can apply for the maturity proceeds as per their own choices; however, pension plan has restricted option.

Wrapping it up!

After going through the above-mentioned points, it can be clearly concluded that ULIP plans along with the benefit of insurance coverage are a much better option of investment for retired pensioners as compared to the traditional retirement plan. With various benefits offered by ULIP plans, it is very important to start investing in ULIPs as early as possible so that one can accumulate maximum corpus to fulfill the future financial goals.