A wide range of retirement plans in India are available to cater to the insurance seekers’ requirements. These plans have multiple classifications based on the plan structure and benefits. These retirement plans can be further divided into eight categories:
Let’s explore these retirement funds in detail:
A Deferred retirement Scheme allows you to accumulate a corpus through regular premium or single premium payments over a policy term. After the completion of the policy tenure, the retirement is provided to the insured. The deferred retirement scheme offers various benefits, including tax exemption.
In a deferred retirement plan, only 1/3rd of the corpus is tax-free on withdrawal, whereas 2/3rd of the corpus is taxable. The amount invested in a deferred retirement plan is locked and cannot be withdrawn for any emergency.
A deferred retirement scheme can be bought by paying one-time payments as well as paying regular premiums. Therefore, these retirement schemes are suitable for all types of investors, be it those who want to invest systematically or those who have a chunk of money to invest in one go.
Under an immediate annuity scheme, the retirement is provided immediately. The policyholder has to pay a lump-sum amount, and a retirement will be provided instantly, based on the lump-sum amount paid by the policyholder.
Under the immediate annuity retirement scheme, the insured can choose from a range of annuity options. Moreover, the premiums paid are tax-exempted as per Income Tax Act, 1961. In an immediate annuity retirement plan, the policy nominee is entitled to receive the money in case of the insured person’s demise during the policy’s tenure.
Under this retirement plan option, the annuity is paid to the annuitant for a specific number of years. The annuitant can choose the period, and if they pass away before receiving all complete payments, the annuity will be paid to the policy’s beneficiary.
With Cover and Without Cover retirement Plans
With cover retirement plans have a life cover component the plan. Upon the policyholder’s death, the policy’s beneficiary pays a lump sum amount. However, the cover amount is not very high since a large part of the premium is paid towards growing the corpus rather than covering life risk.
Under the cover retirement plan, no life cover is offered to the insured person. In the event of the unfortunate death of the insured person, the nominee will get the corpus (till the date of the death). Currently, deferred retirement schemes come with the option of life cover, whereas immediate annuity plans do not offer the option of life cover.
Guaranteed Period Annuity
Under a guaranteed period annuity plan, the annuity is provided to the policyholder for certain periods like 5 years, 10 years, 15 years, or 20 years, whether or not the insured survives that duration.
Under the life annuity plan, the retirement amount will be paid to the annuitant until death. After choosing the option of ‘with the spouse,’ the retirement amount will be given to the policyholder’s spouse in case of the policyholder’s death.
National retirement Scheme (NPS)
The Government of India introduced New retirement Scheme to secure the financial future of the individual after retirement. As per an individual’s preference, the money invested in the National retirement Scheme is put in equity and debt funds to generate returns on investment. The policyholder can withdraw 60% of the amount at retirement, and the rest 40% of the amount is used to purchase the annuity. The maturity proceeds are not tax-free.
The retirement fund is a type of retirement scheme that remains in force for a long period. This retirement plan offers a comparatively better return upon maturity and is regulated by the Government under the retirement Fund Regulatory and Development Authority (PFRDA).
Besides, retirement funds provide better returns during the maturity period when one compares to the other and remains active for a specified period. Insurance providers offer retirement funds intended to empower policyholders to pull back their annuity sum at the hour of the aggregation stage. This component guarantees that the sum is constantly arranged for an unexpected crisis if it emerges. Above all, it keeps you from relying on banks for a loan under such circumstances.
Whole Life ULIPs
Under this option of the retirement plan, the money stays invested for the whole life of the insured, and upon retirement, they can make partial withdrawals and get tax-free income. Additional withdrawals are allowed whenever needed or whenever necessary.
Defined benefit plans ensure that you pay a specific amount from the retirement income for life. It is decided on the premise of the retirement amount, which is formulated keeping into account your earnings as well as the number of years you have served with the employer. This implies that you and your employer can contribute easily to most plans.
In a defined contribution plan, the retirement income is not guaranteed; however, the contributions are. Within this plan, both you and your employer can easily contribute to the plan. Some of the contributions that you make may be matched by your employer.
You are answerable for contributing all commitments to develop your investment funds. The sum accessible for your retirement relies upon the all-out contributions made to your record and the investment returns this cash earned.
HDFC Life Insurance
HDFC Life Insurance offers specialized retirement plans in India for you and your loved ones. With customized coverages and benefits, it is best suited for individuals who need complete protection at affordable costs.
Savings Incentive Match Plan for Employees (SIMPLE) Individual Retirement Account (IRA), or SIMPLE IRA, is a retirement savings plan especially designed for small businesses with 100 or less employees. It is an easy and suitable option for employees of small businesses.
Simplified Employee retirement (SEP) Individual Retirement Account (IRA), or SEP-IRA, is a retirement plan that can be opted for either by self-employed or employers to meet their retirement needs. Tax deductions are applicable under the SEP-IRA, and contributions are made to employees as per their eligibility.
A special Individual Retirement Account (IRA), Roth IRA, is a retirement plan in which an individual pays tax on the money deposited in their bank account every time, but all withdrawals will be tax-free in the future.