Types of Pension Plans in India - Greyfont

Types of Pension Plans in India


The biggest benefit of buying a pension plan or a retirement plan is that these plans provide you with double benefits of investment and insurance cover. All you need to do is simply invest a fixed amount regularly to accrue over a specific period of time but in a phase-by-phase manner. This is how a steady flow of monthly pension would commence once you retire. Say for instance, Public Provident Fund (PPF) is one of the popular retirement planning schemes in India.

Experts suggest that you start early in life. This would help to build a strong corpus towards a secure golden time of your life. With the power of compounding, you can buy a right pension plan that can help you rise above inflation. This accumulated corpus which is a mixture of both investment and gains can take care of increasing healthcare costs and lifestyle requirements post your retirement.


Who should opt for Pension Plans?

Anybody who prefers to have a financially secured retired life should start investing in pension funds. You can get tax deduction under Section 80C of the Income Tax Act, 1961 for a number of retirement plans up to Rs.1.5 lakh.

The corpus accumulated would be sufficient enough to offer you a financial help in case you want to opt for an early retirement. This can be fulfilled by opting for a pension plan early, which further stabilises your retirement or a decision to retire early.

It is never too late to start thinking about retirement plans – the sooner, the better. Whether you are salaried or entrepreneur, there is a variety of pension plans you can choose from as listed below.


1. Immediate Annuity

In this type only a lump sum investment allowed i.e. payment in one shot. The pension begins immediately after investment is done. Suitable if you have the amount sitting in the bank or for businessmen.


2. Deferred Annuity

This plan offers a Systematic premium or one lump sum premium over the tenure. The pension begins only after completing the term of the plan. In addition, there is no taxation until and unless you withdraw the corpus.


3. Annuity Certain

In this type of plan the pension is disbursed after or for a specific period. The policy holder can decide the period according to his requirement. In case of demise of the policy holder, the nominee becomes eligible to claim the pension.


4. Life Annuity

This plan ensures the policy holder is paid pension till his death. This plan comes with an option wherein, the spouse continues to receive the pension after the policyholder’s demise.


5. National Pension Scheme (NPS)

This plan is launched and managed by the central government. Here, your funds are segregated in to equity and debt markets as your inclination. You can withdraw 60% when you retire, and the rest should be used to buy the annuity. Also, the tax levied on the 20% of the corpus you withdraw upon maturity.


6. Guaranteed Period Annuity Plan

In this plan the annuity is disbursed for specific terms like 5 to 20 years.


7. Pension Funds

This plan has better returns once it matures. It is regulated by a government body, The Pension Fund Regulatory & Development Authority (PFRDA). There are 6 fund houses in India at the moment that are authorized to offer pension funds.


8. With Cover Pension Plan

This comes with a cover policy. The policy holder’s dependents are entitled to a lump sum in the event of the policy holders’ death. The insurance amount is not large as most of the premium goes towards building the corpus.


Bottom line, choose wise benefit right.



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