A 5- minute Guide to 6 Best Pension Plans in India
Having a stable income comes with emotional and financial stability. You can live life in peace knowing that you have an income to manage your expenses. But have you ever imagined what would happen when your income stops after you retire?
If you are living a comfortable life right now, you would want to live a comfortable life after retirement as well. But do you know you would need approximately 60 lakhs – 1 crore to lead a comfortable post-retirement life?
Surprised? All the reasons why you must invest in the best pension plans in India.
Here is a list of some of them that you should consider:
1. National Pension Scheme
National Pension Scheme, also known as NPS, is a government scheme launched in 2004, initially for government employees, but then it was introduced for private-sector employees. National Pension Scheme focuses on helping senior citizens build a corpus to lead a retirement life with no financial worries.
NPS Scheme works by opening an NPS account and making regular deposits to the account. A part of this deposit is used towards investment in market-linked assets. This ensures that the subscriber gets higher returns as compared to other schemes; however, being market-linked, NPS has moderate risk.
The scheme offers withdrawal options in a phased manner or lump-sum form. You can withdraw after you retire. A premature withdrawal option is also available in case of medical emergencies. The maximum withdrawal percentage is however 25% of the fund value.
2. Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
Indira Gandhi National Old Age Pension Scheme was introduced by the government of India in 1995. It is one of the best pension plans in India that provides financial protection to the elderly in form of regular income after retirement.
The saving scheme doesn’t require the beneficiary to contribute anything to the fund. Individuals who fall in Below Poverty Line (BPL) category are eligible for the pension scheme (above the age of 60 years).
3. Employee Pension Scheme (EPS)
Employee Pension Scheme is one of the best pension plans in India and is a part of the Employee Provident Fund. It was introduced in 1995 to help salaried individuals generate a corpus through systematic investment habits. The scheme provides pension to employees when they reach the retirement age. It is a monthly contribution-based scheme shared between the employer and the employee. Both contribute 12% of the salary towards this scheme. 8.33% of this employer’s share goes towards the EPS scheme and 3.67% as EPF every month.
Any salaried employee, government or private can participate in the scheme, however, they must complete at least 10 years of employment to receive the benefits of the pension scheme.
4. Atal Pension Yojana
Atal Pension Yojana is one of the best pension plans in India introduced by the government of India. It is named after Atal Bihari Vajpayee and is a contribution-based pension plan.
The plan has a defined minimum amount that must be paid per month. Both the government and the subscriber contribute to the scheme. While the government contributes INR 1000 annually, or 50% of the minimum amount, whichever is lower. The government contributes for 5 years, while the subscriber has to contribute to the scheme for a minimum period of 20 years.
After meeting this minimum requirement, the subscriber is provided with a fixed monthly pension every month.
5. Max Life Smart Wealth Plan
Apart from government pension plans, you can also avail retirement plans by private insurance companies, such as Max Life Insurance. Max Life’s Smart Wealth Plan is one of the best pension plans in India. The plan offers guaranteed returns as a maturity benefit. The plan also gives guaranteed additions in form of bonuses. The plan requires the plan holder to pay regular premiums in exchange for monthly or lump sum payouts, depending on the criteria chosen.
Some Tips to Choose Pension Plans
The benefits of retirement plans are many. Here are some tips that can help you choose the best retirement plans in India.
- Understand your Requirements
It’s important to understand your requirements before you choose a pension plan. Do you wish to live a comfortable lifestyle? What kind of expenses are you expecting? Figuring it all out can help you make a better decision.
- Consider Your Risk Appetite
Knowing your risk appetite would help you choose the best pension plans in India for you. If you have a low-risk appetite, plans with guaranteed income would be suitable. At the same time, if you are open to moderate risk, plans that offer you market-linked returns are advisable.
The Last Word
Buying a pension plan is a step towards financial preparedness. Before you pick a pension plan to meet your requirements, ensure that you read the guidelines for awareness.