When you have worked most of your life, devoted your blood and sweat to your organization for years, retirement seems like a much-awaited phase of life. However, as much it brings peace, it can be stressful as well, given the fact that your income stops, and you are left with no direct means to support your expenses.
Therefore, it’s important to invest in the best pension plan in India. A pension plan is an employee benefit scheme that binds both the employer and the employee to contribute some portion of their earnings in a retirement or pension fund. A pension fund provides monthly income to an individual after they retire.
Government and private companies both provide the best pension plans in India. However, you can also opt for government introduced pension plans to secure your retirement.
Here is a list of the best pension plans in India. But before we get to it, let’s discuss how a pension plan works:
How Does a Pension Plan Work in India?
A pension plan requires an individual, or individuals, to make regular deposits into the scheme. A pension plan generally has two phases, accumulation and vesting phase. The accumulation phase is the time when you make investments and earn interest, vesting phase is when you reap the benefits of the scheme and earn a steady flow of income.
Some Features of the Pension Plan:
A. Guaranteed Maturity Benefit:
The best pension plans in India offer maturity benefit. As the name suggests, they offer guaranteed payouts after retirement, mostly in the form of regular fixed income or the value of the fund. It is generally 101% of the amount of the premium paid, however it differs with the type of pension plan.
B. Guaranteed Death Benefit:
The best pension plan in India can act as life insurance, offering death benefit. The death benefit is generally equal to 105% of the premium paid. This amount of the fund value of a specific pension plan is paid out to the nominee in the event of unfortunate demise of the policyholder.
Now that we have listed the features of the best pension plan in India, let us discuss the various pension plans you can subscribe to:
1. National Pension Scheme:
The National Pension Scheme was introduced in 2004 by PRFDA (Pension Fund Regulatory and Development Authority of India). The policy was designed to provide financial safety to senior citizens after retirement. A working subscriber can make regular deposits into the scheme, get returns according to the NPS interest rate. Since returns get accumulated, and the subscriber earns that accumulated interest, they can calculate the amount they would be earning post retirement through a
In addition to this, a portion of the deposit is invested in equities. Consequently, making it a financially attractive pension scheme.
All employees in the public, private and unorganized sector can invest in the scheme. NPS demands a minimum deposit of INR 6000 in a financial year, through a lump-sum or monthly investment mode.
The minimum age to invest in NPS is 18 years, while the maximum age is 65 years. Non-Resident Indians cannot invest in NPS.
2. Atal Pension Yojana:
Atal pension Yojana is another scheme introduced by the Government of India. The scheme allows a subscriber to make minimum contribution and get pension benefits. The scheme is especially designed for the unorganized sector.
Only individuals belonging to the low-income group can participate in the scheme. It is a shared pension scheme wherein the 50% contribution is made by the Central Government. The contribution will be made for a minimum period of 5 years. Following that, the contribution would be made by the subscriber for 20 years or more.
3. Indira Gandhi National Old Age Pension Scheme
Indira Gandhi National Old Age Pension Scheme is another government pension scheme designed to offer financial security to individuals after their retirement. The scheme was launched in 2007 by the Ministry of Rural Development of India. The scheme is also known as the National Social Assistance Program (NSAP).
Individuals over the age of 60 are eligible to subscribe to the pension scheme. However, they should fall below the poverty line.
The Final Words:
If your objective is to live a stress-free retirement life, free of financial struggles, choosing the best pension plans in India are ideal. You can increase your savings with these pension plans through the power of compound interest. Feel free to use a compound interest calculator to calculate your returns.
Ensure that you read the government guidelines regarding pension before you sign up for the best pension plan in India.