The Best Retirement Pension Plans in 2022: Strategies and Insights
Retirement planning is a critical component of a secure financial future. However, choosing the right pension plan can be overwhelming, especially in the current market landscape. This article explores the best strategies for accumulating a retirement corpus and the importance of avoiding certain pension schemes that may hinder your financial goals. We also compare and analyze the leading pension plans available in India for the year 2022, offering you valuable insights and recommendations.
Understanding Retirement Needs
To determine the best pension plan, it's essential to understand your retirement needs and how to maximize your corpus through various investment avenues. Two primary factors determine the size of your pension post-retirement: the corpus you build and the annuity rates at the time of retirement.
Building Your Retirement Corpus
One of the most effective ways to build a large corpus is by investing through Systematic Investment Plans (SIPs) in equity mutual funds. Specifically, the growth option of equity mutual funds offers a higher return potential, aiding in long-term growth. It’s crucial to visit evaluation websites such as Value Research to understand the performance of various mutual funds and make informed decisions. For example, through SIPs, you can invest a fixed amount periodically, allowing your investments to grow exponentially through the power of compounding.
Systematic Withdrawal Plan (SWP)
Once you are close to retirement, you can transition to a Systematic Withdrawal Plan (SWP) from your mutual fund corpus. This allows you to withdraw earnings on a regular basis, ensuring your income during retirement falls under long-term capital gains tax. The maximum tax applicable on such earnings is 10.4% over a gain of 1 lakh. This approach provides a steady and tax-efficient financial flow post-retirement.
Avoid Insurance Company Pension Schemes
Many insurance companies offer pension plans, but these schemes can significantly limit your corpus at retirement. It is advisable to avoid such schemes as they are designed to generate returns for the insurer, not the investor. Instead, focus on building a substantial corpus through alternative investment methods such as equity mutual funds.
Retirement Planning: Key Insights
Retirement planning involves understanding various pension options and their implications. Here are some key insights to consider:
Retirement Calculators: Use retirement calculators to determine how much you need to save for a secure retirement. Consider factors like your current monthly expenses, entry age, and target retirement age. Alternative Investment Options: While pension plans are useful, they are not the only option. Consider other avenues like equity mutual funds, which offer higher returns and flexibility through SIPs. SWP Strategy: Once you reach retirement, a SWP strategy can help you withdraw amounts systematically, ensuring tax-efficient income. Immediate Annuity: If you wish to ensure a regular income, you can consider an immediate annuity option, which provides regular payouts based on your corpus and the prevailing annuity rates.Best Pension Plans in India for 2022
The following are the top pension plans available in India for 2022, along with key details such as entry age, vesting age, policy term, annual premium amount, and sum assured:
1. Aditya Birla Sunlife Empower Pension Plan
Entry Age: 25 years - 70 years Vesting Age: 80 years Policy Term: 5 years - 30 years Average Annual Premium Amount: Rs.18,000 (varies) Sum Assured: N/A2. Aegon Life Guaranteed Income Advantage Plan
Entry Age: 20 years - 55 years Vesting Age: 85 years (maximum 85 years minus entry age) Policy Term: 85 years minus entry age Average Annual Premium Amount: Dependent on coverage age term and premium payment tenure, min - Rs.1 lakh, max - no upper limit Sum Assured: Min - Rs.1 lakh, max - no upper limit3. Aviva Next Innings Pension Plan
Entry Age: 42 years - 60 years Vesting Age: N/A Policy Term: 13 or 18 years Average Annual Premium Amount: Limited Pay - Rs.50,000, Single Pay - Rs.1.5 lakh, N/A Sum Assured: N/A4. Bajaj Life-Long Goal Pension Scheme
Entry Age: 0 years for Life Assured, 18 years minimum for Policyholder Vesting Age: 99 years, 99 - Entry age of the Life Assured Policy Term: Rs.60,000 minimum (minimum premium amount varies) Average Annual Premium Amount: Rs.60,000 minimum, N/A Sum Assured: N/A5. Canara HSBC Invest 4G Whole Life
Entry Age: 18 years - 55 years Vesting Age: N/A Policy Term: N/A Average Annual Premium Amount: N/A, details based on Age45 years - 1 Annualize Premium0.5Term, Age 45 years - 1 Annualize Premium0.25Term, etc. Sum Assured: N/A6. Pramerica Life Golden Age Plus
Entry Age: 18 years - 50 years Vesting Age: 15, 20, 25 years Policy Term: Rs.10,800 Average Annual Premium Amount: Min - Rs.1.5 lakh, Max - Rs.5 crore Sum Assured: Min - Rs.1.5 lakh, Max - Rs.5 crore7. Edelweiss Tokio Life -Wealth Ultima
Entry Age: With Little Champ Benefits - 18 - 55 years, without Little Champ Benefits - 0 - 60 years Vesting Age: 18 - 100 years Policy Term: Minimum: 10 years, Maximum: For 5 - 6 PPT - 70 years, For 7PPT and above - 100 years minus age of the policyholder at entry Average Annual Premium Amount: Rs.48,000/- minimum, details based on policyholder age Sum Assured: Different Sum Assured according to Age8. Exide Life Golden Years Retirement Plan
Entry Age: 18 years - 65 years Vesting Age: 55 years - 75 years Policy Term: 10 years - 42 years Average Annual Premium Amount: Rs.24,000/- minimum Sum Assured: N/A9. Future Generali - Big Dreams Pension Scheme
Entry Age: 18 years - 75 years Vesting Age: 5 years - 20 years Policy Term: Rs.60,000 minimum, Regular Pay - 1 Annualize Premium, Limited Pay - 1 Annualize Premium, Single Pay - 1.25X Single Premium Average Annual Premium Amount: Rs.60,000 minimum Sum Assured: N/A10. HDFC Life Click 2 Retire
Entry Age: 18 years - 65 years Vesting Age: 75 years Policy Term: 10 or 15 - 35 years Average Annual Premium Amount: Rs.24,000/- minimum Sum Assured: N/AWhen evaluating these options, consider your individual financial goals, risk tolerance, and the specific features offered by each plan. It’s important to consult with financial advisors and carefully review the terms and conditions to make the best-informed decision.
Conclusion
While various pension plans are available, finding the right one that aligns with your financial goals is crucial. By leveraging equity mutual funds through SIPs and considering options like SWP and immediate annuities, you can build a substantial corpus and secure a robust financial future. Carefully evaluate the top pension plans available and ensure you are making the best choices for your future.