Pension Plans
Retirement is a phase when you want to relax and enjoy your life after continuous, long and hectic professional life. On the financial front, your regular income also stops. Managing post retirement expenses may become hard for you with growing inflation. Only 4% of the total working population of India is covered by a pension scheme, usually government employees. The remaining population is either salaried or self employed who do not have the provision of a formal pension scheme.
Ideally, life insurance covers the risk of "dying too early " or "living too long". Pension Plans being a part of life insurance products cover the risk of living too long. Insurance companies provide the dual benefits of pension and insurance cover under pension plans. Pension plans help individuals to plan for their retirement effectively and provide individuals with a regular income for their post retirement years. Also, in the event of the death of the insured, the amount specified as per the policy is paid to your nominee. A pension plan helps you achieve the financial stability after your retirement. You need to infuse a specific amount of money during your working phase to build a corpus.
These plans are best for those planning a secure future. Retirement plans are a decisive way of safeguarding that your current lifestyle is maintained even after you stop working.
Why should I buy Pension Plan?
Here are the top reasons as to why you should buy Pension Plan.
Lead an Independent Life The days are gone, when retirees used to depend on their children or other relatives. Now, people are looking to lead an independent life and for this, there is a need for enough savings. You need to invest prudently with the best pension plan that is the best fit.
To Attain Surplus Funds
Investing with your employer-run pension scheme is a wise move, but unfortunately, the corpus it provides may not be enough to maintain your lifestyle post retirement. That′s why you should go ahead to invest in a pension plan.
To Get Dual Benefit Pension plan offers a dual benefit of insurance and pension both, out of your invested amount towards the pension plan.
Not Enough Govt. Schemes Not all of the Indian population is covered under the social security schemes, and the schemes are also limited. Thus, there is an urgent need to invest and buy the best retirement plan that can provide you a corpus at the retirement to meet any contingency.
To Confront Inflation Inflation has a double impact on your savings. Inflation affects your current purchasing power and also augments financial requirements for the future. Saving appropriate amount regularly towards pension plan will help you confront the impact of inflation.
Increased Life Expectancy Improved and easy access to the advanced medical and healthcare facilities has helped people to live longer. After the retirement, you also need to acquire enough savings to survive a good life. Pension plans cover the risk of living too long.
Phases in a Pension Plan
Pension plans offered by insurance companies provide the dual benefits of investment and insurance. A pension plan includes two phases.
Accumulation Phase: In this phase, you tend to invest and accumulate the wealth during the term of the policy. Your funds are invested in securities or other investment avenues as approved by the insurance regulator, IRDAI by the insurance company.
Distribution Phase: In this phase, you tend to consume the already accumulated wealth. This phase most probably begins at the time of your retirement. Some may prefer to withdraw the money even before their retirement.