Your brief guide to pension plans

Your brief guide to pension plans

Pension plans ensure that you are financially secure during your golden years. Take a look at the important aspects that you must keep in mind while opting for one...

Manoj Kumar Joshi

    Gone are the days when a leading criterion for choosing an employer was the type of pension plan that came with your salary package. Today, more important issues like matching of skill sets to job requirements, scope for personal and financial growth, etc. have come to the forefront. However, this has left individuals with the responsibility of financially planning for their golden years. And it’s all for the best as there are a variety of pension plans available in the market to suit different individuals and their specific needs.
WHAT ARE PENSION PLANS?
    In a pension plan, you are required to pay premiums for a certain number of years and once you reach the retirement age, the insurer returns a lump sum amount that can be then used to purchase an annuity or stream of income for the rest of your life. As in the case of other insurance products, pension plans allow you to choose between unit linked and non-unit linked plans.
CHOOSING A PENSION PLAN
    Here are some thumb rules you could consider while choosing a pension plan that is most suitable for you:
    Decide on your retirement age: The premium paying tenure and the premium amount will depend upon the number of years to retirement, in addition to how much you would like to receive on retirement. The earlier you begin to subscribe to a pension plan, the lower your premium payable will be, other things being the same. Alternatively, with a longer tenure, the accumulated amount at the time of maturity would be high, resulting in a higher annuity.
    Don’t only consider tax benefits: Don’t subscribe to a pension plan solely for its tax benefits. Rather it should form an integral part of the overall retirement planning, taking into account the financial needs of your family members as well.
    Think ahead: Decide on the amount of premium that you will pay after taking into account your present as well as future financial commitments.
    Check out the lock-in period: Generally pension plans have a lock-in period but those plans which offer flexibility of withdrawing a part of the accumulated amount before maturity are helpful in times of financial emergency.
    Be aware of your risk-return preferences: Insurance companies invest premium amounts in varying proportions in different financial instruments across equity and debt. The returns from such investments are subject to market risks.
    Add-ons: There are pension plans which also offer life cover, accident cover, health cover, guarantee of capital, etc. Other plans share profit and also give bonus. However, additional features embedded in a pension plan come at an additional premium.
SUMMING UP Today many individuals are left with the responsibility of financially planning for their golden years. Pension plans are available to facilitate retirement planning. Choosing a pension plan carefully can ensure that it suits your needs. 

 This article sourced from times of India :-http://timesofindia.indiatimes.com/