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Best Pension Plans In India Research Team | Posted On Monday, February 26,2018, 10:32 AM

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Best Pension Plans In India



If you don't plan for retirement, you are making a terrible mistake. You might be on your first job, but the best time for retirement planning, is the first day of your first job.

Inflation, the rise in prices of goods and services with time, is your biggest enemy. If you cannot handle inflation today, how will you be able to afford anything in your old age when you earn nothing?

This is why you require a pension plan and buy it, RIGHT NOW.

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Best Pension Plans In India  

1. Immediate Annuity Plan

If you have just retired and want your pension immediately, opt for an immediate annuity plan. To avail an immediate annuity plan, you must pay a lump sum. Annuity Payments start almost immediately and can be for a limited term or even lifelong.

2. Deferred Annuity Plan

Deferred annuity plan is a retirement plan, which forces you to save for your retirement. You will have to make contributions till a vesting age (say your retirement age).

The contribution you make towards the annuity plan goes on accumulating and earns interest. At the time of vesting, you can encash 1/3rd of the funds and the remaining 2/3rd of the funds, will be used to purchase an annuity plan.

You get tax benefits under Section 80CCC on an investment in annuity. Pensions are taxed.

SEE ALSO: Financial Plans For Retirement Benefits

3. National Pension Scheme

National Pension Scheme popularly called NPS, is an excellent retirement plan for the youth in India. You can start investing in NPS at a young age of 30 and stay invested till you are 60 years. PFRDA has increased the maximum joining age in NPS- Private sector, from 60 years to 65 years.

NPS offers you the active choice and the auto choice. Under the active choice, you may invest a maximum of 50% in equity. The rest is in Government and Corporate Bonds. If you do not have an idea on how to invest for retirement, opt for the auto choice. Investment is in a mix of Equity, Corporate and Government Bonds, depending on your age.

The maximum tax deduction you get on investing in NPS is Rs 1.5 Lakhs a year under Section 80C. You are also eligible for an additional deduction under Section 80CCD(1B). You can withdraw 60% of the corpus in the NPS at retirement, while the remaining 40% has to be invested in an annuity plan. Out of the 60% you withdraw, 40% in tax-free.

4. Atal Pension Yojana

Atal Pension Yojana popularly called APY, is a pension scheme for maids, drivers, gardeners and so on. APY is a pension plan for the workers in the unorganized sector. Poor workers are encouraged to save and invest for their retirement. An Indian citizen between 18-40 years can join the APY, if he has a savings bank account.

APY is a pension plan which promises a fixed pension of Rs 1000/Rs 2000/Rs 3000/Rs 4000 or Rs 5000. The pension you get depends on your monthly contributions. The minimum period of contribution for the APY is 20 years or more. If you start investing in the APY at the age of 40, you must make contributions for at least 20 years to get pensions.

What's special about APY? If you had joined APY before 31.12.2015, the Government contributes 50% of the total contribution by a worker, up to Rs 1000 a year. This is only for a period of 5 years from FY 2015-16 to FY 2019-20.

If a subscriber to the APY dies, the spouse gets the pension till his/her death. On the demise of both spouse/subscriber, the nominee gets the pension money, which had been accumulated till the age of 60 years. Be Wise, Get Rich.

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