Types of Retirement Plans

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Types of Retirement Plans

Deferred Annuity:

A deferred annuity plan allows you to accumulate a corpus through regular premiums or single premiums over a policy term. After the policy term is over, pension will begin.

Immediate Annuity:

In an immediate annuity plan, pension begins immediately. One has to deposit a lump sum amount and pension will begin instantly.

'With cover' and 'without cover' plans

The ‘with cover’ pension plans have life cover component in the plan. This implies that on the death of the policyholder, a lump sum amount is paid to the family members although the cover amount is not very high since a large part of premium is diverted towards growing the corpus rather than covering for life risk. The ‘without cover’ pension plan implies that there is no life cover. Presently, deferred annuity plans are ‘with cover’ and immediate annuity plans are ‘without cover’.

Annuity Certain

As per this clause, annuity is paid to the annuitant for specific number of years. The annuitant can choose the period. If annuitant dies before the policy term, the annuity will be paid to beneficiary.

Guaranteed Period Annuity

As per this annuity option, annuity is provided to the annuitant for the period and beyond. If annuitant dies during the period, amount will be paid to the beneficiary. If annuitant survives, pension will continue throughout life.

Life Annuity

As per this annuity option, pension amount will be paid to the annuitant until death. If annuitant chooses “with spouse” option, after the death of annuitant, the pension will continue and be paid to the spouse.

National Pension Scheme (NPS)

New Pension scheme has been introduced by the government for people looking to build up pension amount. You can put savings in new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of amount at retirement and rest 40% must be used to purchase annuity. The maturity amount is not tax free.

Pension Funds

Owing to the low front load charges, pension funds are a good way to accumulate corpus amount. Pension funds are meant for long term and hence perform better. PFRDA, the government body has allowed 6 companies as fund managers.

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