Pension or retirement plans allow you to save money for old age. These financial tools are effective ways to ensure stable cash flows during retirement. They help you invest in the market through regular contributions, either independently or jointly with the employer if you are engaged in the formal sector. Those in the unorganised sector can also avail of some of the schemes.

Pension plans are of different types to allow people to choose the one that fits them best. For example, defined-benefit plan, or market-linked plan, etc.

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Here are five government-backed pension plans for you to explore.

National Pension System

The National Pension System (NPS) is a voluntary, long-term retirement savings scheme, introduced by the government on January 1, 2004. It was initially open only for central and state government employees, but later on extended to all citizens. Under the scheme, both the employees and the employers contribute to the retirement fund, and the subscribers can withdraw 60 per cent of the accumulated funds upon retirement at 60 and the rest is invested in an annuity plan.

Subscribers can withdraw the 60 per cent fund in a lump sum tax-free or via a systematic withdrawal plan up to 75 years of age.

The subscribers get a unique Permanent Retirement Account Number (PRAN) for transactions. The NPS scheme is open for all Indian citizens aged 18-70, including those living abroad. NPS is mandatory for central government employees who joined service on or after January 1, 2004, with a few exceptions.

Unified Pension Scheme (UPS)

Unified Pension Scheme (UPS) is a newly launched pension scheme for central government employees, but state government employees can also apply. It provides a guaranteed pension of 50 per cent of the average basic pay drawn over the last 12 months prior to superannuation. It also provides a guaranteed family pension equivalent to 60 per cent of the employee’s pension if the subscriber dies. UPS provides a minimum monthly pension of Rs 10,000 on superannuation, provided the employee has completed at least 10 years of service. All other core features of the scheme, like joint contributions, remain the same as NPS.

Atal Pension Yojana (APY)

The Atal Pension Yojana (APY) is a government-backed pension scheme launched in 2015 to help the unorganised sector workers save for retirement. The subscribers must be 18-40 years old, and non-taxpayers with a savings bank account to be eligible. Under this plan, upon reaching 60, the subscriber will receive a guaranteed monthly pension ranging from Rs 1,000 to Rs. 5,000.

Varishtha Pension Bima Yojana (VPBY)

The Varishtha Pension Bima Yojana (VPBY) is a pension scheme for senior citizens, offering guaranteed return. The premium is paid in a lump sum, with a 15-day free look period without additional costs. It is operated by the Life Insurance Corporation of India (LIC) and is available for those aged 60 and above. The pension is paid either monthly, quarterly, semi-annual, or annual based on the pensioner’s preference lifelong. If a policyholder exits the scheme prematurely, they will receive a 2 per cent penalty on the accumulated corpus.