10 Tips to Choose the Best Pension Plan in India

1. Healthcare

Take up a plan that will allow you to invest more as you would need to save for emergency cases as well. The age when you retire will mostly be the age when health issues regarding old age will kick in. So, you need to invest a larger amount to build a larger corpus to be able to save some money for treating medical ailments as well.

2. Pension Calculator

Take up a pension plan that will help you out with a pension calculator. Using a pension calculator helps you to determine an amount that will be as close as possible to your actual amount, if not exact. The pension plan calculator will give you an estimate to how much investment you should make to be able to get what you require.

3. Go by the No – Loan policy or take up a low interest plan

A great tip, here. Do not make the mistake of taking up a loan on your pension plan even though it is an option. Loans are better when they are taken up separately and not on your pension plan or any other policy. Paying off a loan on the retirement policy can cost you a huge amount and might even mess up your investments. So, you can choose a pension plan that will give you a loan at a lower interest rate compared to other plans.

4. Add the rate of inflation

Take up a pension plan which will allow you to get a higher pension fund as the inflation rate will increase the costs of whatever you are going to collect the pension fund for by a large amount. So, take up a pension plan that will allow you to invest in a large amount so that you can build a good corpus. With the high prices now, you can only imagine what the prices will be a few years down the lane. So, choose accordingly after calculating and adding the inflation rate as well.

5. Sign up for the retirement plan early in life

Taking up a retirement plan as soon as you settle into your career is the best time to take it up. A pension plan should ideally be taken up a highly significant number of years before retirement to help build a large corpus amount as the pension fund. You should start planning for your retirement soon after you start working. Do not take up a retirement plan a few years before retiring and expect a good corpus amount. The sooner you take up the plan, the more you can accumulate for your pension fund to use for you post – retirement life.

So, you need to choose a pension plan that has an early entry age to the plan. Many plans offer the pension plan to you as soon as you turn 18 but many plans don’t start till 18, so choose carefully.

6. Lump Sum or Income

Pension plans give the pension funds either in lump sum or in an income through a period of time. You just need to choose the pension plan which gives you what you want. Some pension plans also give the benefits of both by giving a lump sum amount when the plan holder retires and then giving an income for a few years. So, you just need to pick a plan that will either give you both benefits or if you want certain kind of benefit.

7. Invest into diversified funds

Investing your money into various diversified funds is an important tip to keep in mind. Doing this reduces the risks and also helps you get a higher return on investments. Investing into a single fund is dangerous in terms of the high risks that it has. Invest into diversified funds to build yourself a larger retirement fund. Choose a plan that will allow you to invest into a lot of funds at the same time and also allow you to choose the funds that your money will go into.

8. Count taxes too

When you calculate investments for your pension fund, you need to make sure that you consider your taxes as well. The incomes other than the salary are also taxable, so yes, you have to pay taxed even after you retire in case you earn incomes through various sources. You need to keep in mind about the taxes as well as they can cost a huge amount depending on the income that you generate. So, calculating taxes while planning your pension fund will help you to also incorporate the taxes and have an amount to pay for it as well. After your retirement, you do not have a regular income, so you need to have some funds for paying your taxes on rents, returns, etc. So, choose a plan that will offer you good tax benefits on the plan at least.

9. Vesting option

Another great tip is to take up a pension plan which allows the option for vesting. Vesting is the process of shifting the pension policy plan from the plan holder to their family members or their nominees so that they can benefit from the plan after the insured’s demise. The pension plan is vested to the nominees after the death of the insured. This helps the nominee be in control of the pension plan in case the insured dies. Now, the nominee can make certain decisions regarding the plan and the pension fund and they can receive the benefits of the pension fund directly. So, get a pension plan that has the option for the plan to be vested.

10. Death benefit

Choose a plan that will provide a death benefit to the family members or the nominees of the family in case the pension plan holder dies during the course of the plan and before the tenure of the plan ends. This will allow the family to get financial protection in case the insured demises.

Keep in mind the tips and choose the perfect pension plan for you as well as your family.

Charu Verma
Charu decided to unite her Honors Degree in New Media and lifetime of geekiness to pursue a career in tech and gaming journalism. You can usually find her writing about a variety of topics and drooling over new gadgets and games.