Life Insurance

Annuity/Pension

Highlights

Retirement is an inevitable stage that comes in every working individual’s life. It is a stage in life which is likely to bring feelings of apprehension, especially in terms of finances.

Now that regular paychecks will no longer be there, maintaining one’s lifestyle and meeting expenses is a valid worry which will every retired individual’s mind.

However, insurance brings a special product designed specially to provide a regular income after you’ve retired, and in some cases, also provide insurance cover. Here are some important things which can help you decide on which pension plan is best suited for you.

Salient Features

There’s a large part of our population which is fast approaching retirement, making them ideal candidates for pension plans. There is no shortage of insurers offering pension/annuity plans in India, making it easy for one to choose from a bevy of options.

However, before you choose a certain plan, it is important that you understand exactly what that plan has to offer, its advantages, disadvantages and all related details. There are plenty of pension plans available in the market, each with its own set of benefits and advantages. Some of the benefits common to all pension plans are listed below.

Provision of Regular Income Post Retirement

One of the biggest benefits of an pension plan is that it provides incomes after retirement. Pension schemes available in India help you cover your living expenses post retirement by providing a guaranteed income.

With the variety of pension plans available out there, you can choose from one which suits your needs best. While some plans provide you with lifelong income, there are others which offer better returns.

Funds at Times of Need

Some pension plans provide lump sum payments which can help you meet major expenses through life. Before your retirement, you may have several major expenses to take care of life purchasing a house, financing your child’s education, etc. Before you choose a policy, make sure you go over the details of the policy so you know exactly what you will be getting from it.

Tax Benefits

Investing in an insurance policy comes with a set of tax benefits which you can avail. The same applies to retirement insurance plans. Check all the policies which you may have short-listed for the tax benefits they offer.

Investing in a pension plan from an early age can help you save considerably on tax payments. Check your policy details to find out and understand the ways in which you may benefit from the available provisions of tax exemption under Section 80C of the Income Tax Act.

Insurance Protection

In addition to providing income post retirement, pension plans also provide insurance cover. This is especially useful to provide protection in the unfortunate event of a death following which the family’s income will be protected.

Insurance cover forms a part of most retirement plans which are offered by life insurance providers. This is helpful so that the surviving spouse does not have to undergo the financial burden following an unfortunate event.

Annuity/Pension Plan Options

There are 5 segments but the range of options varies from person to person. The 5 segments are as follows:

Annuity Payable For Life

Fixed annuity is paid at regular intervals throughout the insured’s life. The pension is stopped on the annuitant’s death. If you don’t have any obligations post your death, then opt for this option. Highest amount of pension is payable to an individual compared to the other options.

Annuity Payable For Life With A Guaranteed Period

The annuity is paid for a certain period and thereafter till the annuitant is alive. If the guarantee period is shorter, you will get higher pension. The annuity stops on the death of the annuitant. If you have children who can take care of you after a few years, take this option for a shorter period.

Life Annuity With Purchase Price Return

If you want to leave any amount for your dependents, then opt for this option. The annuitant will get pension till he dies, after his death, the purchase price will be given to the nominee.

Increasing Annuity at a fixed rate

The annuity paid increases each year with this option.

Joint life and last survivor annuity

Annuitant will receive pension till he dies, if his spouse survives then she is also entitled to the pension. The considerable amount of pension to be paid to the spouse can be selected.

Types of Annuity/Pension Plans

The following are the types of Annuity/ Pension Plans: available.

Deferred Annuity

Here the annuitant pays premiums till the policy term is over. After its term, the annuitant will start receiving the pension. No tax is levied on the amount the annuitant invests. You can make a one-time payment or make regular contributions towards the plan.

Immediate Annuity

The annuitant has to deposit a large amount and the pension will begin immediately. The annuitant can avail tax benefits prevailing in India.

With & Without Cover Pension Plan

‘With cover’ will give you a life cover, a lump sum amount is paid to your family in the event of your death. ‘ Without cover’ implies you do not get any life cover. The amount built till the date of your death is paid to your dependents. Deferred annuity is with cover and immediate annuity plans are without cover.

Annuity Certain

Annuity is paid for a specific period. If he dies before that period, the beneficiary receives the amount.

Guaranteed Period Annuity

Annuity is paid for certain periods regardless of the survival of the annuitant.

Life Annuity

Pension is paid till the annuitant’s death. If with spouse options is chosen, then the pension will be paid to the spouse.

National Pension Scheme

This is introduced by the government. You have the option of withdrawing 60% of the amount at retirement and the rest is used to purchase annuity. The maturity amount is not tax free though.

Note : Policy details offered are indicative, not exhaustive. Please contact your nearest Arunaya office for further details.