Retirement is an important milestone in life. It marks the beginning of a new life where you can spend quality time with your loved ones without worrying about deadlines or other professional responsibilities. After years of hard work, you would want to retire peacefully and be financially independent. However, happy retirement is only possible if you plan for it from an early stage.
And one of the best ways to accomplish your retirement goals is to invest a small amount in a pension plan throughout your work years and accumulate a corpus. This will help you get a steady income during your old age, and you can meet your expenses without depending on any family member.
When it comes to choosing the right pension plan, it is critical to make an informed decision. You must be aware of its features and benefits, and more importantly, it must align perfectly with your retirement goals. If you are looking for the best pension plan, here are a few features you must consider.
Generally, most pension plans in India offer two types of annuity payouts – immediate and deferred. In immediate payout mode, you get a regular pension soon after purchasing the plan. In a deferred annuity payout plan, you accumulate a corpus over a fixed number of years, usually until you attain the retirement age. Later, when you retire, you become eligible to receive the benefits.
The plan tenure indicates the number of years that the plan allows you to accumulate the funds from which you can receive a regular pension after your policy matures or you attain the retirement age.
This is one of the basic features of the pension plan. It essentially implies the period for which you are entitled to receive the monthly pension after retirement.
Sum assured amount
The sum assured or the fund coverage indicates the total coverage for which you are eligible. While purchasing the pension plan, you must check the sum assured amount, and it should be sufficient to offer you and your dependents guaranteed coverage after retirement.
Partial withdrawal facility
One of the most beneficial features of a pension plan you must look for is the ability to withdraw partially during the fund build-up period. This is highly useful in the event of an emergency. Generally, most pension plans offer a partial withdrawal facility after a specific number of accumulation term.
This is another excellent feature of pension plans. You have the flexibility to invest in the fund option of your choice based on your risk-taking capacity and financial goals. Thus, it helps maximise the returns potentials while at the same securing your capital. For example, if you aim to generate high returns and are willing to take high-risk, you can invest a significant portion of your capital in equity funds or equity-related instruments.
But, if you are looking for stability and get moderate returns, you can invest a large portion of your funds in debt instruments. It is advisable to spread your investment across assets to maximise the returns potential.
Most pension plans are tax-efficient, meaning the amount you contribute is eligible for tax benefits under different Indian Income Tax Act sections.
Now that you are aware of the various features of a pension plan, make sure that you compare the different plans and choose the right one to suit your needs. It is better to start investing towards your retirement from a young age; it will help you leverage the time benefit and build a significant corpus for the future.