A successful career should be followed by excellent future planning, which is a part of your retirement plan. Pension funds always ensure that you have a luxurious retirement life.
The second innings are important in everyone’s lives which can be financially secure by planning and investing in various pension funds such as government pension funds and various other funds.
It is widespread that there is no source of regular income after retirement; hence you have to pool your savings and investments accordingly. The working class of India is generally advised to save up to 15% of its income so that they can consume the same post-retirement. Inflation will rise a lot by the time you retire, so you need to do careful planning while considering the rising living costs.
Pension funds can provide income support during your retirement years. In this article, we will understand pension funds and the plans available, which you can avail yourself of as a pre-requisite to retirement planning.
Pension plans are commonly known as retirement plans, which are necessary for a regular and stable income even after retirement. In pension plans, a portion of your income is invested in designated projects. Investing in such pension plans is necessary considering the growing inflation. Several Government Pension Funds are also available for retirees to secure their retirement
life.
The savings from your income gets used up generally in maintaining a family lifestyle and daily needs. Therefore, when other income sources become non-functional, investments in pension plans can help support a healthy lifestyle. In India, there are two stages to pension plans – the first is the stage of accumulation, where investors would pay an annual premium until their retirement comes, and the investing stage, which would kick in as soon as the retirement age begins. In the investing stage, the retiree would receive annuities till his death.
Under Section 80CCC, you would enjoy tax deductions if you contribute up to Rs 1 lakh 50 thousand towards a pension fund. Residents and non-residents can claim the tax deductions, but the Hindu Undivided Families (HUF) are omitted. Any withdrawal from the pension plans is taxed. Only one-third of the corpus received is tax-free; the rest of the money is paid as an annuity and taxed.
The various retirement pension fund plans are as follows=
National Pension Scheme, in which investments are made either 100% in government securities, 100% in debt securities, or 75% in equity. This is a Government Pension Investment Fund.
An insurer sponsors plans wherein the investment is solely in debt. This type of plan is best suited for conservative investors. The workings of different pension plans are discussed as follows:
Introduced in 2004 by the Indian Government, this scheme was meant for those willing to increase their pension fund amounts. According to your preference, your savings would be accordingly invested either in equity or debt markets. In the NPS, you can withdraw 60% of the invested funds, and the 40% remaining funds arere used to purchase an annuity plan.
You can accumulate an amount by paying a single or regular interval premium. The pension, in the form of monthly payments, begins once the policy term of the pension fund ends. The deferred annuity fund isn’t charged any tax on the money invested till you withdraw it. You can invest in these schemes in two ways, either by one-time or regular payments.
Pension Fund Regulatory and Development Authority (PFRDA) has authorised 6 companies to operate as fund managers. At the time of maturity, these plans provide better returns.
Your pension will commence when a lump sum amount is deposited in your pension fund. An investor can choose from different annuity plans based on his deposit amount. The premiums of immediate annuity are tax-exempt under the Income Tax Act of 1961.
This annuity is given for five years, ten, fifteen, and twenty years, regardless of whether the holder survives the duration.
These plans include a life cover, wherein the family members are paid a lump sum if the policyholder dies, and without shelter, the nominee gets the corpus.
The annuitant is paid an allowance for a specific year, which the annuitant picks.
The scheme pays the annuitant a certain stipend throughout his lifetime. Following the annuitant’s death, his spouse or nominee receives the pension.
It is a fantastic way to beat inflation. You get the lump sum of one-third of the whole corpus; the rest is used to generate a steady cash flow.
The pension plans also serve as long-term savings. Whether you opt for lumpsum or multiple small payments, savings are assured. They also create annuities that can be invested further.
Pension plans also allow investors to either invest in safe government securities/Government Pension Fund or take some risk and invest in debt and equity investment options. The risk eventually leads to higher returns.
Jupiter money makes all your investments and savings management online and hassle-free. They will offer you the best prevalent pension schemes, and you can compare and choose at your convenience. All you have to do is to install the Jupiter money app, open an account free of cost and start investing.
Jupiter Money’s pension fund Calculator is a user-friendly and hassle-free calculator that would help you get an estimated amount of the total corpus you can receive on your retirement. The Pension Funds Calculator is highly accurate and completely free of cost. It would require the following inputs:
Throughout the article, we have seen numerous benefits and disadvantages of pension plans, focusing mainly on available programs. The Government Pension Investment Fund is, therefore, highly reliable as an investment option. Hence, it can be concluded that pension funds at the end of one’s retirement hold an immense value essential for those post-retirement sunset years.
A Pension Funds Calculator is a helpful tool for calculating and determining the amount of money a person would receive post his retirement.
If a person is retiring from a Government job, he shall have a fixed monthly pension per the NPS. However, suppose a person is withdrawing from a private position. In that case, he can claim an allowance or assistance under the Employees Provident Fund if he has contributed to PF during his employment.
Due to its advantages in tax benefits and investment flexibility, the National Pension Scheme is very well-liked.
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