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What are the Different Types of Pension Plans?

Planning for retirement is a very crucial aspect of everyone’s life. Keeping in mind the rising inflation and limited social security systems for seniors, you must start planning early. A pension plan, in this case, can help you keep your financial worries at bay. Moreover, for living a financially stable retired life, it’s essential to plan in time. This way, you will get in the habit of saving money from an early age and build a corpus that will be enough to look after your monetary needs when you retire.

In this article, we will talk about the 4 types of pension plans in India. So, let’s dive straight onto them.

1. NPS or National Pension Scheme

The National Pension Scheme or NPS is regulated by the PFRDA (Pension Fund Regulatory and Development Authority). This scheme could be the best option to receive a regular allowance post-retirement. With the NPS pension plan, you can put up a certain amount during your work life, and your premiums will be invested in your chosen debt and equity markets. Once you are 60, you will be able to draw out one part of your investment in the NPS as a one time amount and keep the rest for buying an annuity. This can assure you of a regular income in terms of returns.

2. Annuity Plans

There are two types of annuity pension schemes in India; deferred and immediate. In the deferred annuity pension plan, you can invest a relatively large amount or make equal payments for a specified time frame. And then, you will receive the annual annuity or monthly annuity after a certain period. On the other hand, once you start paying a lump sum as premiums in the immediate annuity plans, you can instantly receive monthly or annual annuity returns. Both of these annuity plans can be either for a lifetime or a fixed period.

3. Pension Plans in India with Life Cover

These are the types of pension plans which have become quite popular in the recent past. For example, pension plans from leading investors in India, such as the Tata AIA pension plan, can provide you with both the benefits of a life cover and regular investment returns. If you choose these pension plans, one part of the premium will be reserved for your life coverage, whereas the rest of the amount will be invested in your chosen fund in the share market. Upon maturity, you can withdraw the entire amount at one go or choose to receive uniform payments. And in case of your death during the policy term period, your beneficiary will get the death benefits.

4. Pension Funds

The PFRDA has authorised at least six companies in India to offer pension funds. These funds will require you to invest a fixed sum for a fixed period in any fund of your choice. The fund providers will offer you several types of funds to suit your requirements. And as the value of these funds will increase, your investment amount will also increase. So, after retirement, you will be able to withdraw the entire amount or choose to remain invested and receive regular returns.

Conclusion

Before choosing a pension plan, always research well about the options available in the market. Then, and only when you are sure about their benefits, go ahead with the one that best suits your needs.

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