Pension plans offered by life insurance companies help individuals plan effectively for their retirement by helping them build a retirement corpus. Pension plans provide individuals with a regular income in their golden years. Pension plans in India have primarily two phases – accumulation phase and vesting or distribution phase. In the accumulation phase, you will have to pay annual premiums until you reach the retirement age. The money so accumulated is invested in securities approved by the Insurance Regulatory and Development Authority (IRDA), the insurance regulator. As soon as you reach the retirement age, the vesting phase begins. During the vesting phase, you (or your family) will be distributed the retirement corpus as annuities at specific intervals such as- monthly, quarterly, yearly etc. Types Pension plans are of following types:

1. Life Annuity:

In this type of pension plan, you are paid a fixed annuity at regular intervals throughout your life. After your death, the payment gets stopped. Following are the kinds of life annuity:

• Annuity Payable For Life With A Guaranteed Period:

In this life annuity for certain guaranteed period you will be paid an annuity of a higher amount and thereafter, a similar amount is paid at regular intervals until the time you are alive, which will be stopped upon your death. It is suitable if you have someone to look after you.

• Annuity With Purchase Price Return:

In this life annuity, you will get the pension at regular intervals, till you die. After your death, the purchase price of the annuity is also refunded to your beneficiary. If you want to leave any amount for your dependents, then opt for this option.

• Increasing Annuity at a fixed rate:

In this life annuity option, you will receive an increasing amount of pension in each interval at a fixed rate.

• Joint life annuity:

This life annuity can be taken jointly by you and your spouse. You will receive the pension until your death, your spouse will also be entitled to the pension till his/her survival. In other words, the last survivor will receive the pension.

1. With & Without life Cover Pension Plan:

Pension Plans with life cover are those that pay the lump sum assured to the nominee of the policyholder in case of his or her untimely death during the accumulation phase. One is advised to consult miss sold SIPP experts before venturing to invest in such a type of plan. Without life cover plan, on the other hand, do not offer any guaranteed lump sum on the death of the policyholder. But all the premiums accumulated are paid back to the nominee.

1. Traditional and Unit-Linked Pension Plans:

A traditional pension plan invests the fund mostly in Government securities. A Unit-Linked pension plan, on the other hand, invests the fund in combinations of bonds, stocks, mutual funds etc. Eligibility Criteria In order to be eligible for a pension plan, individuals must fall within a certain age group, usually between 35-75 years, which may differ with different insurance providers. Benefits/Advantages:

• One of the biggest advantages of a pension plan is that it helps you cover your retirement expenditures by providing lifelong income on a guaranteed basis.
• Some pension funds also provide lump-sum funds at times when you have to meet major expenses such as- buying a house, financing your child’s education, marriage etc.
• Pension plans also come with income tax benefits under section 80C of the Income Tax Act, 2016. The annuities received by you are tax-free.
• Pension plans also protect you from the unfortunate events such as death by securing the income of the family, reducing the financial burden on the surviving spouse and other family members.
• Pension Plan reduces your dependency on children or other relatives, helping you to lead an independent life.

Riders Following riders are available with pension plans which enhances the benefits provided:

• Accidental death and dismemberment rider
• Term rider
• Critical illness rider
• Waiver of premium rider

Steps to buy pension plan online: Below listed are the five simple steps you need to follow while buying a pension plan online: Step-1:- You need to log in to company’s website from which you need to buy the pension plan. Step-2:- Next, you need to choose the required pension plan from the available ones, by comparing the features of each and every plan. Step-3:- After that you need to choose the coverage/ sum assured and provide all the details. Step-4:- Now the premium will be determined by the insurance company on the basis of the details filled by you. Step-5:- You are then required to pay the premium online using debit card, credit card or net banking facilities available and the policy will be issued. Tips to buy a pension plan:

1. Systematic & Early Planning:

Planning early will be beneficial in your favor as starting early will enable you cost-effective pension plan options. Systematic investment towards pension plan will enable you to accumulate a good corpus by the time you will retire.

1. Choose the Right Vesting Age:

Opt for a pension plan with a vesting age that fits your needs. There are some pension plans with vesting age starting at 40 years. So if you want an income stream that early on in life, go for such a plan. On the other hand, there are plans with vesting age at 75 years as well, which is suitable if you plan to retire later.

1. Right Pension Option:

Choose the pension plan with suitable pension options like Annuity payable for Life with purchase price return, Life Annuity with Guaranteed Period, Increasing Annuity or Joint life annuity, etc. meeting your requirement.

1. Appropriate Pension Amount:

It is important to assess the appropriate amount of the annuity you would need to lead a comfortable living post-retirement, taking into account aspects such as inflation, increased living costs, medical costs etc.

1. Returns :

Choose a pension plan only after you have a fair idea about the returns it would provide. Always keep in mind that if returns are guaranteed, it turns out that rate of returns will be low. Choose an option which provides high returns. Also, it is important to monitor the performance of the plan at regular intervals after selection.

1. Liquidity:

While most pension plans will have a lock-in period, during which you cannot withdraw the invested funds, there may be some plans available which offer a certain degree of flexibility in terms of withdrawal.

1. Tax Benefits:

Insurance payments can help you save on tax payments to a certain extent. The same goes for pension plans. Before you invest in one, ensure that you get the tax benefits that the plan will come with. However, the interest or dividend that you are going to receive on most of the pension plans is not exempted from tax.

1. Minimum & Maximum Investment Amount:

Different pension plans carry different limits in terms of the minimum and maximum investment which can be made towards the plan. So you need to check the limits that fit your budget.

1. Use Annuity Payout Calculator:

The annuity payout calculator displays how much pension you will receive in payment over a decided period of time.  It will also suggest the amount you need to invest to get the defined amount of pension on attaining the vesting age.

1. Additional Benefits:

Most of the pension plans also come with various riders/ add-ons which can be taken to enhance the benefits provided by the plan. No doubt, pension plans are a very good option to build up a handsome corpus and live freely after your retirement. Various other investment options available in the market are way better in terms of cost, returns etc. such as- mutual funds, Public Provident Fund (PPF), National Pension Scheme (NPS), direct equity etc. So, it is essential to consult a  properly licensed and credentialed Certified Financial Planner and choose the option that suits you the most, not by some random person’s opinion or by seeing an advertisement campaign.