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.
What is retirement planning?
Retirement planning can be defined as the recurrent process of calculating, analysing, implementing and reviewing income and investment practices of an individual 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. One can use a variety of planners and tools like a retirement planning calculator to make their ideal choice of retirement plans.
This retirement planning process is specifically essential to a person as it helps them navigate the gaps between their expenses and their income. It also propagates financial literacy, where the person is able to avail plans and fund benefits on their income while also being able to grow their personal corpus for the future. One choose to invest in retirement plans in India well in advance so that their future is secured. There are many types of retirement solutions in India, such as retirement investment plans or pension plans.
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 plans in India, one has to be conscious of a solution that will allow them to support these expenses well after retiring. A Pension plan and retirement 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.
The investment and pension market in India is replete with various types of pension plans.
Once you have an idea of what is retirement planning, it is important to know about the types of retirement plans in India can be divided into three categories:
• Government Retirement Schemes [H3]: Funds that are usually availed at government banks and post offices such as the Public Provident Fund, Senior Citizen’s Savings Scheme, National Pension Fund, and Serps pension which are low-risk and tax free are government-backed schemes.
• Employee Benefit Retirement Funds [H3]: Many government and private organisations offer pensions to their retiring employees. The pension can be determined by factors such as duration of employment, designation at the time of retirement or other meritorious contributions. A defined benefit and defined contribution plan can be examples of types of retirement plans offered by employers.
• Personal Investment/Pension Plans [H3]: Insurance-oriented plans such as annuity plans, cover and no-cover plans can be examples of personal pension plans that are chosen by an investor to support them after retirement
These are built towards allowing an investor to build their financial corpus as per their needs, dependents and income. Some types of pension plans are listed below, which the first 4 types of pension plans are the most favoured by investors:
- Deferred Annuity
- Immediate Annuity
- Cover and No-Cover Pension Plan
- National Pension Scheme
- Whole Life ULIPs
- Life Annuity
- Annuity Certain
There are many iterations of a retirement investment plan in India that claim to offer the highest interest rate for retirees Let us look through the retirement investment plan options available in India:
Senior Citizen’s Saving Scheme
In the process of building a strong retirement investment plan, most retirees are likely to choose the Senior Citizen’s Saving Scheme, which can be availed by any individual of and above the age of 60 from a post-office or a bank.
It is tax free, low risk and offers them an opportunity to secure a steady income at the time of retirement. A good interest rate of approximately 8.6 coupled with a short standard tenure of 5 years, makes it one of the best investment plan for senior citizens in India.
National Pension Scheme
Managed by the Pension Fund Regulatory and Development Authority, the National Pension Scheme is tailor-made to offer pension as a retirement investment plan at an older age. On a default setting, the funds are used to invest in different assets such as bonds, government securities, and equity on behalf of the investor; but they can choose to make the investment choices themselves as well.
Monthly Income Schemes
Similar to the benefits provided by the National Pension System, the Pradhan Mantri Vaya Vandana Yojana offers a secure and high-return retirement investment plan for senior citizens of and above the age of 60.
One can customise their investment plan according to their requirements, where pension may be payable on a monthly, quarterly, semi-annual, or annual basis. Investments can range up to an amount of 15 lakh, for up to a tenure of 10 years. Upon maturity, the amount is paid to the investor or in the event of their demise; passed to a dictated nominee.
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