A critical part of retirement planning is ensuring regular old-age pensions. Pension plans can vary from one individual to another based on their financial needs. Some pension schemes are designed to allow members to contribute to the plan for a fixed period before retirement, while others allow members to invest in a lump sum after retirement. Thus, each pension scheme produces different results, and investors can choose them based on their financial requirements.

Here are some annuity plans to consider:

What Is Annuity Plan?

Members can contribute to an annuity plan in a lump sum or regular, fixed intervals, allowing them to grow their corpus with attractive interest rates earned during the accumulation phase.

Annuity Plan Options 

Annuity plans usually offer four options. A fixed annuity plan allows you to fix the frequency, time and the annuity amount you need. In a differed annuity plan, you can decide when to receive the pension; the plan kicks in when you start receiving the pension. In an immediate annuity plan, you invest in a lump sum, and the pension begins within a month of purchasing the policy. A variable annuity plan is a defined benefit pension scheme in which the pension payable to a participant fluctuates based on how well the plan’s investments perform.

You can choose any of these options based on your financial ability and requirements.

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Pension with Life Cover

Insurers also provide pension plans with life insurance. These plans are tailored to people with dependents like children, spouses, etc. They get monthly pensions like any other annuity plan. However, in the event of death, the nominee will receive the pension as per the member’s wish.

Annuity for Life

In this scheme, the subscriber gets monthly pensions until death. The pension amount is pre-determined. After death, the pension goes to the spouse. The scheme provides a financial cushion to the family as it provides a stable income for life and after death, to the family spouse.

National Pension System (NPS)

The National Pension System (NPS) is a small savings scheme for retirement. It has a Tier 1 and Tier-2 account. Tier 1 account is for pension, while Tier 2 account is a market-linked investment vehicle for wealth creation. Tier-2 account is available only to those who have a Tier 1 account.

NPS provides annual returns of around 9-12 per cent. At retirement, the subscriber can withdraw up 60 per cent of the accumulated funds, and the rest must be invested in an annuity plan. Also, the subscriber can choose to withdraw the 60 per cent in a lump sum or via a systematic withdrawal plan at maturity.

Public Provident Fund (PPF) 

PPF has a 15-year lock-in, allowing investors to grow their wealth over the long term. PPF offers 7.1 per cent annual returns. Investments under PPF attract various tax benefits. They have the exempt, exempt, exempt status, meaning there is no tax on contributions, interest income and the principal sum at maturity. PPF is an ideal vehicle for wealth creation for retirement.

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Employee’s Provident Fund (EPF)

The EPF scheme is regulated by the employment and labour ministry. The scheme stipulates that every employee of an organised sector contributes 12 per cent of their monthly income towards EPF, and an equal sum is contributed by the employer each month. Of the employer’s 12 per cent, 8.33 per cent goes towards the Employees’ Pension Scheme (EPS) and 3.67 per cent goes towards EPF every month. On reaching age 58, the pension kicks-in and the member starts receiving a monthly pension based on the corpus. EPF also allows partial withdrawals from the fund during emergencies such as medical treatments or house construction.