Retirement Insurance Company - Pension Plans: Offering Security in Old Age

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Retirement Insurance Company
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Pension Plans Offering Security in Old Age
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• There comes a stage in our lives when we are no
  longer capable of working long hours and earning
  a good amount of money. At the same time, our
  need for finances might not decrease, given the
  chances of ill health as age progresses.
• How does one manage this mismatch? Pension
  plans are insurance policies that encourage you
  to save when you are earning well to build a
  corpus that can be used to meet your financial
  needs when you grow old. Highly suitable for
  people who do not have pensionable jobs or have
  pensions that are not sufficient to meet their
  funding requirements.
• Types of Pension Plans
• Pension or retirement plans are generally of two
  types
• Deferred Annuity Plans These policies have an
  accumulation phase, where the insured pays
  premiums for a specific number of years and once
  he retires, he starts getting a fixed pension
  income.
• Immediate Annuity Plans These pension plans
  entail payment of the annuity from Day One, but
  in return for an immediate lumpsum payment. These
  plans are suitable for people who have lumpsum
  money, but are looking for a steady stream of
  income every month.

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• Returns on Pension Plans
• The returns on pension plans are lower than other
  insurance products, mainly because the
  requirement of offering assured returns forces
  the insurance providers to invest in no risk or
  low risk instruments with lower returns.
• While conventional pension policies are used to
  invest in government bonds and securities, recent
  years have seen the introduction of Unit Linked
  Insurance Plans (ULIPs), which can invest a
  portion of the corpus in the equity markets.
• This allows the insurer to offer better returns
  that can take care of inflation to some extent.
  Some Retirement Insurance Company insurers offer
  capital guarantee ULIPs, wherein the insured is
  guaranteed a payment equivalent to the premiums
  paid (net of expenses) plus the bonus declared on
  maturity.

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• Pension plans can also be classified as with
  cover or without cover plans. While the with
  cover policies offer an assured life cover in
  case of an eventuality, the without cover plans
  entail payment of the corpus built till that date
  (net of deductions) in case of any eventuality.
  Without cover policies do not have a provision
  for sum assured.
• In India, all pension plans should offer
  non-zero returns on all premiums or guaranteed
  maturity benefits. Pension plans allow you to
  withdraw 1/3rd of your payout in a lump sum, with
  the rest allocated for the annuity.
• This lump sum amount is not taxable according to
  the Income Tax Act of 1961, but the monthly
  pension received is taxed as the receivers
  income.
• Source https//insurancelifedotorg.wordpress.com
  /2014/12/03/pension-plans-offering-security-in-old
  -age/

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