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Pension plans
Pension plans also known as retirement plans are investment plans that lets you allocate a part of your savings to accumulate over a period of time and provide you with steady income after retirement. Even if a person has a good amount of savings, a pension plan is nevertheless crucial. Savings get exhausted very fast and are sometimes used in emergencies, so selecting the best pension scheme helps you secure your cash flow for meeting basic daily needs post retirement. When you continuously invest in pension plans, the amount grows manifold due to the compounding effect which makes a lot of difference to your final savings corpus. A right pension scheme lets you plan for retirement in a phased manner. So it is advisable to choose a best pension plan that can act as a savior in your golden years.
Benefits of New Pension Scheme (NPS)
Choose the investment option you prefer Investors can choose the investment option that suits them best under the new pension scheme. These options include equity, debt and government securities. The new pension scheme also has an automatic option where the funds are allocated according to their expectations and their age. This automatic option in the new pension scheme opts for riskier investments if the person is young and settles for non-riskier choices as the person advances in age over the years. For the sake of protection of the funds and the persons future, the new pension scheme limits the exposure to equity to 50%. Opt for the pension fund manager of your choice The new pension scheme in India offers the investor a choice of different pension fund manager to oversee their investments. Track your new pension scheme account with a unique number The pension makes it easier for people to plan their retirement planning. Each individual who has opted for the new pension scheme is given a Permanent Retirement Account Number or PRAN, that lets him or her track their portfolio from wherever they are. This number is unique for each individual and stays the same for each subscriber throughout his or her life. A choice of two accounts for more flexibility The new pension scheme has a two-tier account structure that gives the investor more flexibility in planning their pension. The first account, also called the Tier I account is one from where the investor cannot make any withdrawal. All the money accumulated by the investors in the new pension scheme is placed in this account and then invested as per their investment choices. The Tier II account of the new pension scheme is one from where the investor can make voluntary withdrawals depending on their needs. The Tier II account of new pension schemes cannot exist without an active Tier I account. One account to manage throughout your career One of the biggest drawbacks of provident funds such as the EPF is that it is managed by various state divisions for different states. Going for a job in a new city in a different stage generally means changing the EPF organisation also. This is a difficult and very time-consuming process. All this is avoided by the new pension schemes. People can now change their jobs or relocate to any other part of the country without having to worry whether they will be able to access their provident fund contribution. They can easily access their new pension scheme account from their home and even manage their allocation without having to fill in innumerable forms or stand in long queues in PF offices. New pension scheme available to non-salaried people The new pension scheme offers small or large traders and businessmen who run the bulk of trade in India, the option to have a tax savings pension plan that will help them build a retirement corpus to take care of them when they retire from business. Government-backed plan The new pension scheme is managed by the Pension Fund Regulatory Development Authority (PFRDA), a body ratified by an act of Parliament. This means the new pension is as secure as people can expect it to be. The returns promised will be delivered and people do not have to worry whether they have been taken for a ride. Tax Benefits The final pay-out is provided in two ways. 33% of final payout can be withdrawn in lump-sum and is not taxable.However, the rest of the amount is taxable. Up to Rs. 50,000 of the contribution is not taxable under section 80CCD(1B) of the Income Tax Act, over and above the Rs. 1.5 lakh tax emption provided under section 80C of the Act. The tax benefits are available for both salaried and non-salaried individuals.
Tips to Choose the Right Pension Plan
Understand your needs: It is crucial that you understand how much you need to sustain yourself and your dependents after you retire. Make allowance for the inflation and thus, the increased expenses in the future. Do some research: Read through the pension details in depth to understand what you are opting for. Some policies will explain in the pension details the type of income you are likely to receive. Look up your needs from your retirement planning calculations and pick the plans that make sense. The pension details in the policies will offer information on the periodicity of your income, how much is guaranteed, how much is dependent on market performance etc. Understand the different products: There are a large number of retirement solutions in the market. Choose the ones that can give you the income you need. You can know this number from your retirement planning calculations. Know about other retirement planning options: Do not stick to a retirement planning solution just because someone says so. One product that suits your friend may not suit you. Look up the provident funds, the pension plans offered by the asset management companies and those offered by the insurance companies to get what you need. Do not look at only the tax benefits: Though tax benefits matter, they form only a part of the overall picture. If you plan for your retirement, considering only the tax benefits, you may not be able to build up the corpus you need for your retirement. So, do your retirement planning calculations and invest the amount you know you should get a secure future. Pension Plans – Latest News 2017-18 Budget wish list: Push for pension plans, zero GST on term policies In the latest budget released by the Indian Government, it announced the launch of term policies with zero GST, which will encourage people to buy term policies, and hence, eventually help the country to have a better GDP percentage for life insurance schemes. As annuity schemes in India have always been taxable, they have always been considered as an unattractive investment option. The government has thus, made a big move to make term insurance plans available at zero GST or at a minimum rate of 5% to deepen financial inclusion amongst the middle-class investors. There isnt also much attention focussed towards the health & protection needs of the middle and lower income class individuals. Allowing tax deduction provisions for life & health insurance schemes under Section 80 will help address the needs of this class, which forms a major chunk of the countrys population. Budget 2018: PMVVY Limit to Increase to 15 Lakh Under budget 2018, the Finance Minister of India has proposed the extension of scheme Pradhanmantri Vaya Vandana Yojana(PMVVY) till March, 2020. Moreover, it has also been proposed by the FM that the current limit of investment will increase to Rs 15 lakh from the pre-existing limit of Rs 7.5 lakh for every senior citizen. PMVVY is a government backed pension scheme that was introduced to secure the future of senior citizens in India. The scheme was launched on May 4th 2017 and was initially available for 1 year. The amount invested in PMVVY is known as purchase price. As per the pension plan option chosen by an individual i.e. (monthly, quarterly, yearly), the pension is provided as arrears starting from the end of the period chosen. Based on the amount invested, the maximum tenure of the policy is 10 years. The increase in the investment limit is proved to be beneficial to seniors. TATA Steel Backed New Pension Plan to Be Joined By a Large Number of UK Workers A throng of 1,22,000 workers have signed a deal to switch to a new pension scheme backed by TATA Steel UK after they were affected by the end of the 15 billion pound pension scheme. According to the reports, it has been confirmed that approximately 97,000 members have indicated their shift from British English Pension Scheme to the New Plan by returning their option form, whereas, just 14% of the members chose to stick with the old pension scheme. As a part of the biggest pension conference conducted in the UK, the options form was distributed to around 1,22,000 schemes members. Among which 97,000 members filled the forms completely and returned them. TATA Steel UK has welcomed the outcome of the conference conducted as a positive choice. However, the spokesperson of the company has stated that much work is still required to deliver a secure future for their UK business. Budget 2018 and the Financial Aid for Senior Citizens In his Budget speech 2018, Finance Minister Arun Jaitley focused on caring for the senior citizens. He announced various tax & related incentives to decrease the fiscal burden on people above 60 years of age and above. All these moves are very welcome since senior-citizens face rising health-care expenses and depend upon their income earned from interest & pension. From affording a 5-fold increment in the tax exemption limit on income earned from savings, recurring deposits and fixed deposits held with post offices and banks of Rs.50, 000, to eliminating the tax deducted at source on this income, budget 2018 offers well-deserved relief to senior citizens. This is done by leaving a more money in the hands of senior citizens savers who are totally dependent on earned interest to meet their day to day expenses. Another tax change is the offer to increase the yearly tax deduction limit for medical insurance premium or/and medical reimbursement to Rs. 50,000 for the elderly. An applause-worthy step is setting the ceiling for tax deduction for medical costs incurred on specific critical diseases to Rs. 1 lakh, regardless of the age of the senior citizen. The Central Government Unwinds Atal Pension Plan Norms Payment banks and small finance banks can now offer the Atal Pension Yojana or APY. The Central government believes that such a move will considerably increase the coverage of the plan. The government is of the opinion that these banks will strengthen the current distribution channels of the APY scheme. As per the Ministry of Finance, this step will further help in boosting outreach to subscribers under the scheme. As of now, ten small finance banks and eleven payment banks have obtained licenses from RBI to initiate banking operations in India. Participation in Atal Pension Yojana helps in building a pensioned society and also provides viable fee revenue to banks by way of alluring incentives for mobilizing the scheme at the rate of Rs 120 to 150 per account. As per government reports, by the end of January 2018, more than 84 lakh subscriptions were registered under the scheme. Indians Best at Retirement Planning: Survey, 2017 Indians resumed their position of best placed in retirement planning in a global survey conducted by Aegon Retirement Readiness Index (ARRI), in 2017. The superannuation survey was done among 15 countries. Aegon Retirement Readiness Survey 2017, was based on 6 parameters including – personal responsibility of the respondents, mindfulness, financial understanding and responsibilities, retirement planning, and income replacement. ARRI said that the report is not illustrative of the general population and is directed towards the medium and high-income earners across these cities. India ranks the highest on the ARRI score index with 7.6 score, among the 15 major economies of the world. US, Brazil, China and UK follow the trail with a score of 6.9, 6.4, 6.3 and 6.2 respectively. Spain (4.7) and Japan (5.1) scored the lowest on the index. SeLFIES for India In a major decision taken by the Indian Government, it has decided to allocate a total of Rs 50 lakh crore for the infrastructure, in the budget released for the current financial year. At the same time, there are also certain provisions introduced in the budget to improve the life of retirees/senior citizens. “A life of dignity” comes with the confidence to ensure the income security of senior citizens in India. SelFIES (Standard of Living indexed, Forward-starting, Income-only Securities) is a long-term bond introduced to help retirees lead their pre-retirement lifestyle even after their retirement. Most of the times, part-time employees, people from low-income group, rural workers, etc. cant save enough for their retirement due to the obvious lack of funds. SeLFIES will give them access to invest in low-cost, safe and liquid bonds issued by the Indian Government. Financial literacy rate in India is still relatively low; hence, SeLFIES is a welcoming change that will allow people to access their funds when they actually need it, eventually simplifying the process of retirement planning. Plea against pension for `freedom fighter In a latest statement released by the Madurai Bench of the Madras High Court, the Madurai Bench has favoured an appeal to grant freedom fighter pension to a senior citizen. Earlier, the claimant, Govindarajulu, 91 years of age, was denied pension based on the fact that he was not able to fulfil the specified eligibility criteria for the requirement. According to the set criteria to claim freedom fighters pension, the claimant should already have attained the age of 18 at the time of her or his imprisonment. Also, s/he is required to submit a copy of jail records by the authorized committee. In an earlier judgement, Govindarajulu was denied pension, stating that he wasnt able to submit relevant documents to specify his date of birth. In its statement, the Madras High Court has expressed regrets and apologized for the states insensitive approach toward the whole matter. In the latest statement released, Justice K Ravichandra Babu chided the system for its `bureaucratic dogmatism” and said that pension facility for freedom fighters is not a charity done by the government, but is a bestowal of honour for those who fought for our freedom. In the judgement released by the Madras High Court, the Tamil Nadu Government has been ordered to grant the pension for Govindarajulu in two weeks. A Panel to Analyze Pension plan The Kerala state government is to appoint a `committee to analyze the socio-economic & legal significance of the CPS (Contributory Pension Scheme). The committee will analyze the effects of 2 facets of the CPS: the transfer of states funds to (private) fund managers and the co-occurring existence of 2 schemes in the state- the statutory schemes and the contributory schemes. An announcement was made by finance minister of Kerala Dr. T M Thomas Isaac in a reply to a Calling Attention motion put forward by MLA Mullakkara Ratnakaran. Mr. Ratnakaran demanded the establishment of a `commission for studying pension plans. Dr. Isaac has accepted Mr. Ratnakarans demand for specifying a time-duration for the committee to present its report. The committee members and schedule are yet to be announced later. As per the contributory pension scheme, a government employee contributes a decided percentage of his/her basic salary, it is then combined with the dearness allowance and an equal portion is contributed by the government. A pension fund manager will be entrusted with the same. The fund manager will invest the money in the shares and mutual funds. Sale of Traditional Pension Plans Increase Owing to recent market fluctuation Looking at the fluctuations in the equity market, Indians have now started opting for traditional pension plans as well as life insurance plans instead of ULIPs. As reported by Insurance Regulatory and Development Authority, people are now inclined more towards life insurance policies such as life insurance (67.8% of products in the market were purchased). Moreover, 18.6% pension plans were purchased in the financial year 2015-16. The sales of these products have increased as compared to year-on-year sale. Sales of ULIPs have gone down, and its contribution to the insurance pool has slipped from 16.1% (2014-15) to 13.6% (2015-16). Out of Rs. 25 lakh crore invested by life insurance policies, only Rs. 3.4 lakh crore was from ULIPs. The traditional products have a major share in the current market. In this sector, life funds contributed Rs 16.9 lakh crore. Moreover, Rs 4.6 lakh crore was the contribution of the pension funds.
Types of Pension Plans in India
Pension plans are way better investment plans that ensure secure life after retirement. These plans have multiple classifications, based on the plan structure and benefits.These plans can be further divideded- 1. Deferred Annuity 2. Immediate Annuity 3. Annuity Certain 4. With Cover and Without Cover Pension Plans 5. Guaranteed Period Annuity 6. Life Annuity 7. National Pension Scheme (NPS) 8. Pension Funds Deferred Annuity: A deferred pension scheme allows you to accumulate a corpus through regular premiums or single premium over a policy term. After the policy term is over, the pension will begin. The advantages of deferred pension plans are immense and these include tax benefits that are associated with this pension scheme. No tax is levied on the money that an individual invests in the plan unless he withdraws it. As deferred pension scheme can be bought by making the one-time payment or by making regular contributions towards it, therefore, the plan suits to all types of investors: those who want to invest systematically and those who have a chunk of money to invest. Immediate Annuity: In an immediate annuity scheme, pension begins immediately. One has to deposit a lump-sum amount and pension will start instantly,basedon the lump-sum amountinvested by the policyholder. A range of the annuity options is available to choose from.Moreover, the premiums paid are exempted for tax, as per Income Tax Act, 1961.After the death of a policyholder, his nominee will be entitled to get money. With Cover and Without Cover Pension 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. However, 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. In the event of unfortunate death of the policyholder, the nominee will get the corpus (till the date of the death). Currently, deferred pension plans are “with cover” and immediate annuity plans are “without cover”. Annuity Certain:As per this clause, the annuity is paid to the annuitant for a specific number of years. The annuitant can choose the period and if he dies before exhausting all payments, the annuity will be paid to the beneficiary. Guaranteed Period Annuity:As per this annuity option, annuity is given to the life assured for certain periods like 5,10,15 or 20 years, whether or not he survives that duration. Life Annuity:As per this annuity option, pension amount will be paid to the annuitant until death. After choosing the “with spouse” option, the amount of pension will be given to the spouse of the policyholder, in case of the death of the annuitant. 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 the new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of the amount at retirement and rest 40% must be used to purchase the annuity. The maturity amount is not tax-free. Pension Funds:In a way, investing in a pension plan is a good option indeed. As these plans remain in force for a long time, they offer comparatively better returns at maturity. Pension Fund Regulatory and Development Authority (PFRDA), the government body has allowed 6 companies as fund managers.
What are the Advantages of Pension Plans
If you are trying to find the best pension plan in India, it may be beneficial to understand the advantages of retirement planning and the retirement benefits each pension schemes in India provides. Though each pension scheme in India comes with its own specific retirement benefits, it makes sense to understand what the plans offer. For detailed information on the pension details, visit our website, PolicyBazaar.com, to understand to find the best retirement plan in India for you. Regular Income after Retirement:The pension schemes in India offer you a guaranteed income that helps you to meet your living expenses. Looking at specific pension details offered by each plan will help you to better tweak your retirement planning and get the income you need in the future. Some of the insurance plans offer income for life, which ensures that the investor does not have to worry about the future. Since these life income plans offer better returns, a smart way to go for retirement planning is to opt for two plans, one each for the two heads of the family so that the proceeds from each plan can be used to meet their respective expenses. Money When You Need It:Some of the plans offer lump sum payments that you can use to meet major expenses. The years leading up to retirement require a large expenditure for reasons, such as building a house or buying a flat. Some give the option for you to withdraw a large chunk of your corpus to meet such large expenses. Looking the policy details for the various plans will help you in retirement planning, as you will be able to pick the ones that suit your expected needs in the future. Get the Tax Advantage: The investment you make in the retirement planning solutions will help you to save significantly on your tax. In fact, if you plan it well, you may even be able to lower your income tax slab to a lower one from the higher one in which you were earlier bracketed. Checking the policy details will also allow you to understand if you can take advantage of all the exemptions available under section 80C. Insurance Cover: The retirement planning solutions people invest in will help provide them with an insurance cover, to protect their familys income if the worst comes to pass. Most life insurance companies offer an insurance cover along with their retirement plans so that the spouse does not have to face any financial difficulty if the unfortunate happens.
Pension plans
Pension plans also known as retirement plans are investment plans that lets you allocate a part of your savings to accumulate over a period of time and provide you with steady income after retirement. Even if a person has a good amount of savings, a pension plan is nevertheless crucial. Savings get exhausted very fast and are sometimes used in emergencies, so selecting the best pension scheme helps you secure your cash flow for meeting basic daily needs post retirement. When you continuously invest in pension plans, the amount grows manifold due to the compounding effect which makes a lot of difference to your final savings corpus. A right pension scheme lets you plan for retirement in a phased manner. So it is advisable to choose a best pension plan that can act as a savior in your golden years.
Benefits of New Pension Scheme (NPS)
Choose the investment option you prefer Investors can choose the investment option that suits them best under the new pension scheme. These options include equity, debt and government securities. The new pension scheme also has an automatic option where the funds are allocated according to their expectations and their age. This automatic option in the new pension scheme opts for riskier investments if the person is young and settles for non-riskier choices as the person advances in age over the years. For the sake of protection of the funds and the persons future, the new pension scheme limits the exposure to equity to 50%. Opt for the pension fund manager of your choice The new pension scheme in India offers the investor a choice of different pension fund manager to oversee their investments. Track your new pension scheme account with a unique number The pension makes it easier for people to plan their retirement planning. Each individual who has opted for the new pension scheme is given a Permanent Retirement Account Number or PRAN, that lets him or her track their portfolio from wherever they are. This number is unique for each individual and stays the same for each subscriber throughout his or her life. A choice of two accounts for more flexibility The new pension scheme has a two-tier account structure that gives the investor more flexibility in planning their pension. The first account, also called the Tier I account is one from where the investor cannot make any withdrawal. All the money accumulated by the investors in the new pension scheme is placed in this account and then invested as per their investment choices. The Tier II account of the new pension scheme is one from where the investor can make voluntary withdrawals depending on their needs. The Tier II account of new pension schemes cannot exist without an active Tier I account. One account to manage throughout your career One of the biggest drawbacks of provident funds such as the EPF is that it is managed by various state divisions for different states. Going for a job in a new city in a different stage generally means changing the EPF organisation also. This is a difficult and very time-consuming process. All this is avoided by the new pension schemes. People can now change their jobs or relocate to any other part of the country without having to worry whether they will be able to access their provident fund contribution. They can easily access their new pension scheme account from their home and even manage their allocation without having to fill in innumerable forms or stand in long queues in PF offices. New pension scheme available to non-salaried people The new pension scheme offers small or large traders and businessmen who run the bulk of trade in India, the option to have a tax savings pension plan that will help them build a retirement corpus to take care of them when they retire from business. Government-backed plan The new pension scheme is managed by the Pension Fund Regulatory Development Authority (PFRDA), a body ratified by an act of Parliament. This means the new pension is as secure as people can expect it to be. The returns promised will be delivered and people do not have to worry whether they have been taken for a ride. Tax Benefits The final pay-out is provided in two ways. 33% of final payout can be withdrawn in lump-sum and is not taxable.However, the rest of the amount is taxable. Up to Rs. 50,000 of the contribution is not taxable under section 80CCD(1B) of the Income Tax Act, over and above the Rs. 1.5 lakh tax emption provided under section 80C of the Act. The tax benefits are available for both salaried and non-salaried individuals.
Tips to Choose the Right Pension Plan
Understand your needs: It is crucial that you understand how much you need to sustain yourself and your dependents after you retire. Make allowance for the inflation and thus, the increased expenses in the future. Do some research: Read through the pension details in depth to understand what you are opting for. Some policies will explain in the pension details the type of income you are likely to receive. Look up your needs from your retirement planning calculations and pick the plans that make sense. The pension details in the policies will offer information on the periodicity of your income, how much is guaranteed, how much is dependent on market performance etc. Understand the different products: There are a large number of retirement solutions in the market. Choose the ones that can give you the income you need. You can know this number from your retirement planning calculations. Know about other retirement planning options: Do not stick to a retirement planning solution just because someone says so. One product that suits your friend may not suit you. Look up the provident funds, the pension plans offered by the asset management companies and those offered by the insurance companies to get what you need. Do not look at only the tax benefits: Though tax benefits matter, they form only a part of the overall picture. If you plan for your retirement, considering only the tax benefits, you may not be able to build up the corpus you need for your retirement. So, do your retirement planning calculations and invest the amount you know you should get a secure future. Pension Plans – Latest News 2017-18 Budget wish list: Push for pension plans, zero GST on term policies In the latest budget released by the Indian Government, it announced the launch of term policies with zero GST, which will encourage people to buy term policies, and hence, eventually help the country to have a better GDP percentage for life insurance schemes. As annuity schemes in India have always been taxable, they have always been considered as an unattractive investment option. The government has thus, made a big move to make term insurance plans available at zero GST or at a minimum rate of 5% to deepen financial inclusion amongst the middle-class investors. There isnt also much attention focussed towards the health & protection needs of the middle and lower income class individuals. Allowing tax deduction provisions for life & health insurance schemes under Section 80 will help address the needs of this class, which forms a major chunk of the countrys population. Budget 2018: PMVVY Limit to Increase to 15 Lakh Under budget 2018, the Finance Minister of India has proposed the extension of scheme Pradhanmantri Vaya Vandana Yojana(PMVVY) till March, 2020. Moreover, it has also been proposed by the FM that the current limit of investment will increase to Rs 15 lakh from the pre-existing limit of Rs 7.5 lakh for every senior citizen. PMVVY is a government backed pension scheme that was introduced to secure the future of senior citizens in India. The scheme was launched on May 4th 2017 and was initially available for 1 year. The amount invested in PMVVY is known as purchase price. As per the pension plan option chosen by an individual i.e. (monthly, quarterly, yearly), the pension is provided as arrears starting from the end of the period chosen. Based on the amount invested, the maximum tenure of the policy is 10 years. The increase in the investment limit is proved to be beneficial to seniors. TATA Steel Backed New Pension Plan to Be Joined By a Large Number of UK Workers A throng of 1,22,000 workers have signed a deal to switch to a new pension scheme backed by TATA Steel UK after they were affected by the end of the 15 billion pound pension scheme. According to the reports, it has been confirmed that approximately 97,000 members have indicated their shift from British English Pension Scheme to the New Plan by returning their option form, whereas, just 14% of the members chose to stick with the old pension scheme. As a part of the biggest pension conference conducted in the UK, the options form was distributed to around 1,22,000 schemes members. Among which 97,000 members filled the forms completely and returned them. TATA Steel UK has welcomed the outcome of the conference conducted as a positive choice. However, the spokesperson of the company has stated that much work is still required to deliver a secure future for their UK business. Budget 2018 and the Financial Aid for Senior Citizens In his Budget speech 2018, Finance Minister Arun Jaitley focused on caring for the senior citizens. He announced various tax & related incentives to decrease the fiscal burden on people above 60 years of age and above. All these moves are very welcome since senior-citizens face rising health-care expenses and depend upon their income earned from interest & pension. From affording a 5-fold increment in the tax exemption limit on income earned from savings, recurring deposits and fixed deposits held with post offices and banks of Rs.50, 000, to eliminating the tax deducted at source on this income, budget 2018 offers well-deserved relief to senior citizens. This is done by leaving a more money in the hands of senior citizens savers who are totally dependent on earned interest to meet their day to day expenses. Another tax change is the offer to increase the yearly tax deduction limit for medical insurance premium or/and medical reimbursement to Rs. 50,000 for the elderly. An applause-worthy step is setting the ceiling for tax deduction for medical costs incurred on specific critical diseases to Rs. 1 lakh, regardless of the age of the senior citizen. The Central Government Unwinds Atal Pension Plan Norms Payment banks and small finance banks can now offer the Atal Pension Yojana or APY. The Central government believes that such a move will considerably increase the coverage of the plan. The government is of the opinion that these banks will strengthen the current distribution channels of the APY scheme. As per the Ministry of Finance, this step will further help in boosting outreach to subscribers under the scheme. As of now, ten small finance banks and eleven payment banks have obtained licenses from RBI to initiate banking operations in India. Participation in Atal Pension Yojana helps in building a pensioned society and also provides viable fee revenue to banks by way of alluring incentives for mobilizing the scheme at the rate of Rs 120 to 150 per account. As per government reports, by the end of January 2018, more than 84 lakh subscriptions were registered under the scheme. Indians Best at Retirement Planning: Survey, 2017 Indians resumed their position of best placed in retirement planning in a global survey conducted by Aegon Retirement Readiness Index (ARRI), in 2017. The superannuation survey was done among 15 countries. Aegon Retirement Readiness Survey 2017, was based on 6 parameters including – personal responsibility of the respondents, mindfulness, financial understanding and responsibilities, retirement planning, and income replacement. ARRI said that the report is not illustrative of the general population and is directed towards the medium and high-income earners across these cities. India ranks the highest on the ARRI score index with 7.6 score, among the 15 major economies of the world. US, Brazil, China and UK follow the trail with a score of 6.9, 6.4, 6.3 and 6.2 respectively. Spain (4.7) and Japan (5.1) scored the lowest on the index. SeLFIES for India In a major decision taken by the Indian Government, it has decided to allocate a total of Rs 50 lakh crore for the infrastructure, in the budget released for the current financial year. At the same time, there are also certain provisions introduced in the budget to improve the life of retirees/senior citizens. “A life of dignity” comes with the confidence to ensure the income security of senior citizens in India. SelFIES (Standard of Living indexed, Forward-starting, Income-only Securities) is a long-term bond introduced to help retirees lead their pre-retirement lifestyle even after their retirement. Most of the times, part-time employees, people from low-income group, rural workers, etc. cant save enough for their retirement due to the obvious lack of funds. SeLFIES will give them access to invest in low-cost, safe and liquid bonds issued by the Indian Government. Financial literacy rate in India is still relatively low; hence, SeLFIES is a welcoming change that will allow people to access their funds when they actually need it, eventually simplifying the process of retirement planning. Plea against pension for `freedom fighter In a latest statement released by the Madurai Bench of the Madras High Court, the Madurai Bench has favoured an appeal to grant freedom fighter pension to a senior citizen. Earlier, the claimant, Govindarajulu, 91 years of age, was denied pension based on the fact that he was not able to fulfil the specified eligibility criteria for the requirement. According to the set criteria to claim freedom fighters pension, the claimant should already have attained the age of 18 at the time of her or his imprisonment. Also, s/he is required to submit a copy of jail records by the authorized committee. In an earlier judgement, Govindarajulu was denied pension, stating that he wasnt able to submit relevant documents to specify his date of birth. In its statement, the Madras High Court has expressed regrets and apologized for the states insensitive approach toward the whole matter. In the latest statement released, Justice K Ravichandra Babu chided the system for its `bureaucratic dogmatism” and said that pension facility for freedom fighters is not a charity done by the government, but is a bestowal of honour for those who fought for our freedom. In the judgement released by the Madras High Court, the Tamil Nadu Government has been ordered to grant the pension for Govindarajulu in two weeks. A Panel to Analyze Pension plan The Kerala state government is to appoint a `committee to analyze the socio-economic & legal significance of the CPS (Contributory Pension Scheme). The committee will analyze the effects of 2 facets of the CPS: the transfer of states funds to (private) fund managers and the co-occurring existence of 2 schemes in the state- the statutory schemes and the contributory schemes. An announcement was made by finance minister of Kerala Dr. T M Thomas Isaac in a reply to a Calling Attention motion put forward by MLA Mullakkara Ratnakaran. Mr. Ratnakaran demanded the establishment of a `commission for studying pension plans. Dr. Isaac has accepted Mr. Ratnakarans demand for specifying a time-duration for the committee to present its report. The committee members and schedule are yet to be announced later. As per the contributory pension scheme, a government employee contributes a decided percentage of his/her basic salary, it is then combined with the dearness allowance and an equal portion is contributed by the government. A pension fund manager will be entrusted with the same. The fund manager will invest the money in the shares and mutual funds. Sale of Traditional Pension Plans Increase Owing to recent market fluctuation Looking at the fluctuations in the equity market, Indians have now started opting for traditional pension plans as well as life insurance plans instead of ULIPs. As reported by Insurance Regulatory and Development Authority, people are now inclined more towards life insurance policies such as life insurance (67.8% of products in the market were purchased). Moreover, 18.6% pension plans were purchased in the financial year 2015-16. The sales of these products have increased as compared to year-on-year sale. Sales of ULIPs have gone down, and its contribution to the insurance pool has slipped from 16.1% (2014-15) to 13.6% (2015-16). Out of Rs. 25 lakh crore invested by life insurance policies, only Rs. 3.4 lakh crore was from ULIPs. The traditional products have a major share in the current market. In this sector, life funds contributed Rs 16.9 lakh crore. Moreover, Rs 4.6 lakh crore was the contribution of the pension funds.
Types of Pension Plans in India
Pension plans are way better investment plans that ensure secure life after retirement. These plans have multiple classifications, based on the plan structure and benefits.These plans can be further divideded- 1. Deferred Annuity 2. Immediate Annuity 3. Annuity Certain 4. With Cover and Without Cover Pension Plans 5. Guaranteed Period Annuity 6. Life Annuity 7. National Pension Scheme (NPS) 8. Pension Funds Deferred Annuity: A deferred pension scheme allows you to accumulate a corpus through regular premiums or single premium over a policy term. After the policy term is over, the pension will begin. The advantages of deferred pension plans are immense and these include tax benefits that are associated with this pension scheme. No tax is levied on the money that an individual invests in the plan unless he withdraws it. As deferred pension scheme can be bought by making the one-time payment or by making regular contributions towards it, therefore, the plan suits to all types of investors: those who want to invest systematically and those who have a chunk of money to invest. Immediate Annuity: In an immediate annuity scheme, pension begins immediately. One has to deposit a lump-sum amount and pension will start instantly,basedon the lump-sum amountinvested by the policyholder. A range of the annuity options is available to choose from.Moreover, the premiums paid are exempted for tax, as per Income Tax Act, 1961.After the death of a policyholder, his nominee will be entitled to get money. With Cover and Without Cover Pension 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. However, 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. In the event of unfortunate death of the policyholder, the nominee will get the corpus (till the date of the death). Currently, deferred pension plans are “with cover” and immediate annuity plans are “without cover”. Annuity Certain:As per this clause, the annuity is paid to the annuitant for a specific number of years. The annuitant can choose the period and if he dies before exhausting all payments, the annuity will be paid to the beneficiary. Guaranteed Period Annuity:As per this annuity option, annuity is given to the life assured for certain periods like 5,10,15 or 20 years, whether or not he survives that duration. Life Annuity:As per this annuity option, pension amount will be paid to the annuitant until death. After choosing the “with spouse” option, the amount of pension will be given to the spouse of the policyholder, in case of the death of the annuitant. 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 the new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of the amount at retirement and rest 40% must be used to purchase the annuity. The maturity amount is not tax-free. Pension Funds:In a way, investing in a pension plan is a good option indeed. As these plans remain in force for a long time, they offer comparatively better returns at maturity. Pension Fund Regulatory and Development Authority (PFRDA), the government body has allowed 6 companies as fund managers.
What are the Advantages of Pension Plans
If you are trying to find the best pension plan in India, it may be beneficial to understand the advantages of retirement planning and the retirement benefits each pension schemes in India provides. Though each pension scheme in India comes with its own specific retirement benefits, it makes sense to understand what the plans offer. For detailed information on the pension details, visit our website, PolicyBazaar.com, to understand to find the best retirement plan in India for you. Regular Income after Retirement:The pension schemes in India offer you a guaranteed income that helps you to meet your living expenses. Looking at specific pension details offered by each plan will help you to better tweak your retirement planning and get the income you need in the future. Some of the insurance plans offer income for life, which ensures that the investor does not have to worry about the future. Since these life income plans offer better returns, a smart way to go for retirement planning is to opt for two plans, one each for the two heads of the family so that the proceeds from each plan can be used to meet their respective expenses. Money When You Need It:Some of the plans offer lump sum payments that you can use to meet major expenses. The years leading up to retirement require a large expenditure for reasons, such as building a house or buying a flat. Some give the option for you to withdraw a large chunk of your corpus to meet such large expenses. Looking the policy details for the various plans will help you in retirement planning, as you will be able to pick the ones that suit your expected needs in the future. Get the Tax Advantage: The investment you make in the retirement planning solutions will help you to save significantly on your tax. In fact, if you plan it well, you may even be able to lower your income tax slab to a lower one from the higher one in which you were earlier bracketed. Checking the policy details will also allow you to understand if you can take advantage of all the exemptions available under section 80C. Insurance Cover: The retirement planning solutions people invest in will help provide them with an insurance cover, to protect their familys income if the worst comes to pass. Most life insurance companies offer an insurance cover along with their retirement plans so that the spouse does not have to face any financial difficulty if the unfortunate happens.
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