Know the Different Types of Pension Plans

Retirement is that time of your life when you are free to lead a life you have always dreamt of. No more deadlines to meet at work, no pressure on work life balancing. It is the time when you can join a hobby class, or go on a foreign trip or lead a relaxed life with your grandchildren around. But your dreams will remain unfulfilled if you have to worry about money after retirement.

pension plan

Retirement planning is the best way to ensure a financially independent life post retirement. Pension plans guarantee a steady flow of income after your retirement. Most Life Insurance companies these days offer different retirement plans to meet the various needs of their customers. Here you will get to know about different types of pension plans available in the market.

Immediate Annuity plans

Immediate Annuity is a type of pension plan in which your annuities start coming immediately after the payment of the purchase price. Immediate annuities are single pay plan. That is to say, you have to pay only once and you will start receiving pension immediately.

This plan is mostly suitable for those who have not saved for their retirement throughout their employment years but now realize the importance of retirement planning when they are on the verge of retirement or have already retired. So, in order to secure their post-retirement life, they can buy an immediate annuity plan from a reputed insurance provider. All they have to do is pay a lump sum amount and start enjoying the stream of income coming every month. In case of your untimely death, your nominee will receive the sum assured.

Deferred Annuity plans

A deferred annuity is a type of pension plan that allows you to build a huge corpus for your retirement.  You pay your premiums regularly through a limited period of term. At the end of the policy term, you start receiving the annuities.

This plan is suitable for those who are still employed and have many more years before his or her retirement.  A deferred annuity plan can fetch you a huge return if you start early. You can invest systematically throughout the policy term. Your accumulated money will turn into a huge corpus at the time you retire. At maturity you will not only receive the fund value of your vested amount, you will also receive additional bonuses if any. In case of your unfortunate death, the nominee will receive the sum assured.

Life Annuity plans

Life annuity is a type of pension plan that promises to pay you pensions through your life. In other words, you will start receiving annuities as long as you live. The plan often comes with two options. One is “with spouse” option which guarantees to pay the sum assured to your spouse as long as he or she survives. The other option is “return of premiums” option. If you opt for this option, your nominee will get back all the premiums you paid throughout the policy term, in case of your death. Life annuity plans come with both single and limited pay options.

Guaranteed period annuity plans

This is a type of pension plan that guarantees to pay you annuities through a limited number of years. You accumulate your money through the policy term and start receiving annuities at the end of your policy term. Under Guaranteed period annuity, you will receive annuities usually for 5 /10 /15 /20 years. In case of your untimely demise your family will receive the annuity amount for the remaining period.

Pension plans with or without cover

Some retirement plans offer life coverage while others do not. With-cover pension plans are those that provide the death benefit to the nominee in case of your unfortunate death. However, the death benefit amount offered by these retirement plans are not huge as most of the accumulated amount are used for the growth of the retirement corpus through investment. Retirement plans without cover are those that do not offer life coverage. In case of your death, your nominee receives back the purchase price or the total premium amount you paid throughout the policy term.

The importance of retirement planning is undeniable in our lives. Pension plans are the key to a successful retirement planning. If you want to lead a financially independent life post retirement there is no better way than investing in a pension plan.

Different types of retirement plans offer different benefits. So if you understand the differences between different types of retirement plans it will not only make your retirement planning much easier but also help you choose the most appropriate plan for you.

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