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Retirement plans are life insurance products designed to act as investment plans to allocate a part of your savings to accumulate over a period and provide financial security after retirement.

Retirement pension plans help you invest your earnings over the years and create a fund which you can withdraw as a whole or in parts during your retirement years. Further, with dual benefits of protection with investment, these plans are ideal for covering your financial needs in the golden years of your life. Given the high cost of living and rising inflation, retirement planning has become more necessary.

Why do You Need a Retirement Plan?

We tend to invest our hard-earned money in meeting our day-to-day needs so much so we pay little attention on securing a comfortable and prosperous life for ourselves in our later years.

Most of us have demanding jobs and even demanding lifestyles. In the daily hustle bustle of out stressful lives, do we even give a thought to life after retirement? But we owe it to ourselves to take a deep breath and think about the future too. What would be the point of working so hard if we are not able to enjoy the fruits of labour in our retired life? Apart from lifestyle, we have responsibilities towards our families that may not go away with retirement.

To ensure that your post-retirement life is smooth and peaceful, and your family is still well looked-after, planning for retirement now is very important. Basis your current age, income, lifestyle and life goals, you can choose an investment amount and plan for your retirement.

Do you believe in Income after Retirement?

Retirement from professional life should not mean that you stop getting a regular income. Retirement plans allow you to allocate a part of your savings and let them grow over a period of time. You can then opt to get regular pay-outs after you retire.

I’m too young to plan my retirement! Why now?

When you’re young, the idea of retirement hardly comes to your mind. The most prevalent thought is that ‘Retirement is so far away!’ ‘Why would I need to save for it right now?’

Long Term Protection

Fewer Responsibilities

Even though your income may not be a lot when you’re younger, you also have fewer responsibilities such as house loan, child’s education etc. and these responsibilities just keep on growing with age. Hence, saving for retirement becomes easier, early in your professional life.

Long Term Protection

Power of Compounding

The biggest advantage of kick-starting your retirement planning is the power of compounding which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus for your retirement.

Tax Benefit u/s 80C

Saving Little Early Than Saving a Lot Later

Between saving small amounts early in life or saving big chunks of your income close to your retirement age; which one would you prefer? Saving little early does seem like the easier and more sensible option, doesn’t it? With big expenses and a lifestyle to maintain, it would be harder to save large amounts of money when you’re middle-aged or close to retirement.

Peace of Mind

Tax Benefits

Most retirement plans give you tax benefit on both the investment amount and the maturity amount. You may invest in pension plans, guaranteed returns plans or market-linked plans, all of these have different provisions for tax benefits.

Peace of Mind

Long Retired Life

On an average, a working Indian professional would retire around 60 years of age. Given that you lead a healthy life and considering the increased life expectancy, your retired life could span up to 40 years! How do you possibly imagine of saving for a long tenure of 40 years in just a couple of years before your retirement? Starting in your twenties is the only practical solution to save for a long retired life.

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Types of Retirement Plans

Deferred Annuity Plans

A deferred annuity is a long-term investment in which you invest a sum of money, then receive payments several years down the line after the initial sum has accrued interest. In a deferred annuity plan, there are two phases: accumulation phase and income phase. At the end of accumulation phase, you can withdraw 1/3rd of the corpus and buy an annuity plan with the remaining 2/3rd of the corpus. You can claim tax benefits under Section 80CCC for an investment in annuity. However, the pensions are taxed.

There are 2 types of Deferred Annuity Plans:

Traditional Retirement Plans

The premiums paid towards these plans are mostly invested in debt instruments like government securities. These are best suited for individuals who are low risk-takers.

Unit Linked Insurance Plans

A ULIP is a life insurance plan with an additional feature of investing your money in the market for future financial goals such a retirement. This means that you get the dual benefit of protecting your family as well as retirement planning.

A ULIP also provides tax benefits as the premium or amount invested into the ULIP is exempted from tax under Section 80C. The amount received on maturity of this investment plan, is also tax exempted under Section 10(10D) of the Income Tax Act, 1961

Employee’s Provident Fund (EPF)

EPF is available to all salaried employees subject to the rules laid down by EPFO. In this case, the employer and employee contribute a percentage of employee’s salary to the employee’s

Public Provident Fund (PPF)

PPF is a popular long-term investment option which offers capital preservation and attractive interest rates. A minimum of Rs 500 to a maximum of Rs 1,50,000 can be invested each financial year.

National Pension Scheme (NPS)

Contributions to NPS can be made from a young age of 18. NPS offers investors: the active choice and auto choice. In active choice, 50% of the contribution is invested in equity, while the rest is in government and corporate bonds. In auto choice, investments are made in a mix of equity, corporate and government bonds, depending on your age.

Why ULIPs Make Good Retirement Plans?

How to Save Tax with Retirement Plans?

Apart from securing your family’s financial future and your own future income, a Retirement Plan also offers tax benefits under section 80CCC.

Let us look at the tax benefits offered by different types of retirement plans:

Immediate Annuity

While the interest you get is taxed as ordinary income, the principal amount is exempt from taxes. However, once you receive the principal amount in full, the payments will be fully taxable. The good thing about this is that the income tax rate will be based on the income earned at the time. Assuming that you withdraw the money after retirement, the rate will be relatively low.

Deferred Annuity

There are two phases in a deferred annuity plan: Accumulation Phase and Income Phase. In case of the deferred annuity plan, your income grows tax-free during the Accumulation Phase which means that you won’t have to pay any taxes on the money that accumulates during the time of premium payment.


The premium or amount invested into the ULIP is exempted from tax under Section 80C. The amount received on maturity of this investment plan, is also tax exempted under Section 10(10D) of the Income Tax Act, 196.

5 Tips to Buy the Right Retirement Plan

Here the few tips to choose the best retirement pension plan to suit your retirement needs:

  1. Start Early : Retirement planning is most effective when you start it as early as getting your first salary. It is fine if you start saving with small amounts. You can grow your contribution towards your retirement corpus as you progress professionally and financially.

  2. Don’t Put All Your Eggs in One Basket : It is always advisable to diversify your portfolio by investing in different types of market instruments when it comes to your retirement planning. Equity fund, debt funds, fixed deposits etc. are some of the instruments you can invest in to fulfil your post-retirement goals.

  3. Keep Vesting Age in Mind : Vesting age is the age by which you start receiving your pension from a retirement plan. It is not necessary that each one of us will retire at the age of 60 years. Some of us may have plans to retire at 45 years and some of us may want to continue working till 70 years. It’s important to choose a plan options that suits your requirements and aspirations.

  4. Compare Plans and Expenses before Buying : Don’t just compare plans in terms of returns, also factor in the expenses and charges that come with retirement plans. Pick a plan that is economical and viable on all fronts.

  5. Don’t Just Rely on Traditional Schemes : Traditional Retirement Schemes like PPF or EPF may be reliable and time-tested, but they will hardly suffice as a steady income post retirement. Hence, always thing of other retirement plans such as ULIPs.

Frequently Asked Questions

  • What is a pension plan?

    A pension plan or a retirement plan are insurance products designed with double benefits of the best saving plan along with an investment scheme to cover retirement financial need.

  • What are unit-linked retirement plans or pension ULIP plans?

    Unit-linked retirement plan or Pension ULIP plans are market-linked pension products offered by life insurance companies. They are suitable for individuals looking for a long-term retirement plan that doubles up as an investment.

  • I already have a provident fund account. Do I still need a retirement pension plan?

    Yes, a retirement plan acts as an additional financially security secure your retirement needs. The growth of inflation has been at a rapid rate, so your PF account might not be sufficient to cover your complete expenses in the future.

  • What are the benefits of the retirement plan?

    Retirement plan offers dual benefits of savings and investments for your retirement needs. Equity exposure in pension plans can go up to 75 percent. In pension plans, you can select fund according to your requirements with both capital safety and appreciation of investments.

  • What is the right time to buy a retirement plan?

    With increasing costs of lifestyle, medicines, and healthcare, the amount required for ensuring a financially independent retirement, becomes quite huge. Retirement planning becomes a crucial part of the earning years. Starting early on the journey will help you build a significant corpus (lump sum amount) for meeting your future needs.

  • How to calculate the retirement fund/corpus?

    Retirement planning can be summarised as save and invest as much as you can. Remember that planning for the future is a mixture of both fiscal and investment prudence. Using a retirement calculator is an easy way to decide on the retirement fund.
    Calculating the pension fund using retirement calculator are beneficial for several reasons:
    • It helps you calculate how much you need to save each month to retire with a large sum at the end of one’s professional career.
    • A retirement benefits calculator will also help you determine the precise investment opportunities which you must take advantage of.
    • Compare the various retirement options and plans that most competent financial organisations provide. Nowadays, even listed entities have their own retirement planning sections.
    • It helps you identify the various retirement planning strategies which exist and helps you review and compare them too. • If you have any high value plans post-retirement, our calculator will help you save accordingly for such exigencies and planned spending sessions.
    • Lastly, an online retirement calculator is useful when you are short on time and you need to take decisions on such important aspects as future investment options.

  • Does retirement plan provide tax benefits?

    Along with future security and insurance protection, investing in a retirement pension plan also qualifies for some tax benefits under Section 80CCC. Following are the tax benefits provided by pension plan-
    • Immediate annuity is a guaranteed pension plan with tax benefit on the premium payments. All the premium payments under this plan are fully taxable once you have received the principal amount in full.
    • The tax benefit of a deferred annuity is that it lets your income grow tax-free during the Accumulation Phase. This means you will not have to pay any taxes on the money that accumulates during the time of premium payment.

  • Does retirement plan provide death benefits?

    Some retirement plan provides flexible death benefits along with pay-out options. Immediate annuity plan and easy pension plan by Edelweiss Tokio offers death and survival benefit.

  • Does pension end after the policyholder's death?

    No, retirement or pension plan does not end after the policyholder's death. Depending upon the type of pension plan selected, either the spouse or a chosen nominee is entitled to the pension after the policy holder's death.

  • What is participating and a non-participating pension plan?

    A participating plan enables the policyholder to share the profits of the insurance company in the form of bonuses or dividends. In a non-participating plan, the profits are not shared, and no dividends are paid to the policyholder. Both these types of plans provide guaranteed life cover.

  • Can a person have multiple pension plans?

    Yes. A person can have multiple pension plans with private banks and other commercial pension plan policy providers.