Overview of Pension Plans: The word ‘pension plans’ would create a sort of consciousness to all 30 plus-year-old employees sooner or later in their lives. In fact, it is one of the serious concerns to governments especially when it works in the direction of offering a financially protected life to its senior citizens.
The pension plan in India can be broadly categorized into plans under private sectors and government sector. Plans bought by individuals from insurance companies in India are gaining importance with an enhancement in quality of standard of living and rates.
Today, there are various insurance service providers that offer retirement and pension plans with good returns, competitive benefits, and services. These plans are completely different from term insurance policies, which are purchased to cover risk in case of a sudden death of a breadwinner.
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Terms involved in Pension plans
Participatory Policy
The plan which offers separate specified returns as a part of the profits gained on investment using premiums paid to the insurer.
Vesting Date
It is a date when the policyholder begins getting income in the pension form from his insurance provider.
Death Benefit
The money which is earned as a benefit on the policyholder’s demise is called as a death benefit.
Surrender Benefit
It is the sum earned when the insured withdraws the plan during the premium payment period. There is a specific certain period after which the plan can be surrendered.
Generally, old age pension plans offered by insurance companies in India are preferred by self-employed and people who already have another backup for the retired life. In India, the majority of people are benefited from tax benefits which are possible because of these policies.
These insurance products are designed to give a rough idea of how the future expenses can be managed. Policyholders can avail a wide range of pension plan benefits and enjoy their financially protected lives.
Insured person can get tax benefit under section 80C of Income Tax Act and the deduction of taxable amount is a benefit to the policyholder. These plans provide individuals a regular income in their golden years by helping individuals build a retirement corpus.
Why Buying Pension Plan is Necessary