Pension plans aim to build retirement corpus and therefore it is very important to know and understand the importance of retirement planning. Retirement planning is the most important goal of every individual and no one can ignore the importance of the same. Improved health facilities have resulted in longer life expectancy. At present life expectancy of an average Indian is around 66 years and is likely to increase progressively in future. The rising trend of nuclear family with no one to fall back upon has forced people to seriously think about planning for retirement. This has to be addressed carefully at a younger age itself. The government is also concerned about this issue and has launched NPS (National Pension System) which is offering tax sops too. IRDAI is also trying to increase awareness for pension plans offered by the life insurance companies.
Accordingly IRDA has also revised its guidelines. Pension plans are also commonly known as retirement plans.
Pension schemes offered by the life insurance companies are of two different types. One is deferred annuity plan and other is immediate annuity plan. Deferred annuity or pension schemes are meant to create retirement corpus by depositing some regular income every year. Immediate annuity gives you monthly payment as pension for which you have to deposit lump sum with the life insurance companies. New Pensions plans will be launched as traditional plans, ULIP plans and also as variable insurance plans. It is very important to know the features of the plan you are buying.
As per new norms, pension plans may have insurance cover. It is not mandatory now to have life cover in new pension plans. Insurers may come out with either of the option i.e. with or without life cover. One has to assess the impact of your choice before opting for a particular pension plans. One must also note that there will not be 4.5% annual guarantee in pension plans in new products. So you have to check what returns your pension plan will give if you continue till the end and also evaluate whether the same will be sufficient to meet your post retirement expenses or not.
Partial withdrawals are not allowed as per new norms and also at the end you have to mandatorily buy annuity from the corpus accumulated. You will be allowed to commute only 1/3rd of the corpus and from the balance you need to buy compulsory annuity from the same insurer with whom you have accumulated your retirement corpus. Previously policy holders were allowed to buy their annuity from any insurer who is offering good deal. Now you have to stick to the same insurer whether your insurer is offering you most competitive rate of annuity or not.
Presently pensions plans are allowed as deduction u/s 80-C up to 1 lakh in line with life insurance premium. One must take investment decision after knowing and understanding all the features of the product and take informed decision. Retirement is one of the most important goals of any individual so one need to be extra careful while investing for rainy days.
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