Long gone are the days when you invested Rs. 1 lakh a year for 20 years to receive Rs. 20 lakhs. While our grandparents and parents were dependent on this benefit for their future retirement, the truth is that the present generation will not. The essential question here is, “What can the present generation do to secure their future?” and “Are there any chances of ever getting one that can match up to these plans?”.
The answer is Yes. Today,there are far more ways to potentially grow your money. There is another world of investment options beyond these traditional plans that can provide opportunities for maximizing your returns and saving for retirement.
The Pension Scenario Today
Prior to January 1, 2009, all Indian employees reaped the benefit of a defined benefit pension plan until the National Pension System (NPS), with the decision of the Government of India, decided to put a stop to it. This scheme was initially available only to government employees but was later opened to all Indian Citizens with the aim to make India a pensioned society. Under this scheme the employee can contribute towards his/her retirement account along with the employer, ensuring the welfare and social security of the individual.
Nevertheless, these traditional pension plans did not offer a sum assured as they were more investment-oriented rather than insurance oriented. This meant that even though an individual was saving up for retirement,he/she was not getting a life cover with it. However, post September 1, 2010, the IRDAI (Insurance Regulatory and Development Authority of India) made it mandatory that individuals were also provided with life/ health cover and a minimum guarantee of 4.5%. This introduced numerous pension plans in the market that differed in annuity payment options, the duration of benefits,and benefits extended to the beneficiary.
What Is the Best Choice?
The financial market is filled with numerous market plans that either linked or non-linked to the equity market. Among all these plans, the most beneficial investment plan for post-retirement is ULIP (Unit Linked Investment Plan) pension plan. ULIPs today are growing in popularity. In comparison to the traditional pension plans, ULIPs also promise a life coverage along with other features and benefits that a person can enjoy post-retirement.
ULIPs Vs. Traditional Pension Plans
ULIPs function in a completely different way from traditional pension plans. Let us elaborately discuss what these differences are-
- Tax Benefit: Both traditional and ULIP pension plans are allowed a tax deduction of Rs. 1.5 lakhs under section 80C/ 80CCC. However, ULIPs offer tax benefits during investment as well as maturity.
- Higher Returns: Unlike traditional pension plans, ULIPs guarantee higher returns especially if someone is planning his or her retirement early in life. ULIPs gives a policyholder a choice of funds and investment in equities.
- Transparency: ULIP Pension Plans are more transparent than traditional pension plans with respect to NAV, the disclosure of portfolio (where the money is invested), and expenses.With traditional pension plans, the investor has no clue about where his/her money is being invested.
- Flexibility: Individuals with a pension plan are invested in it for the entire tenure whereas a person who has invested in a ULIP pension plan can always make a switch. ULIPs are endowed with numerous options that permit the investor to select a plan suitable for them like equity plans or a much-balance done if they do not want to take risks.
The Best ULIP Pension Plans
|Policy name||Minimum entry age||Maximum entry age||Policy administrative charge||No. of free switches in a year|
|Max Life Insurance Platinum Wealth Plan||18 years||60 years||NIL||Unlimited|
|SBI Life — Smart Wealth Builder||7 years||60 to 65 years||Up to Rs.60 per month||2|
|Reliance Nippon Life Classic Plan II||7 years||60 years||Rs.40 per month||52|
|HDFC Life Click2Invest ULIP||0 years||65 years||NIL||Unlimited|
While comparing and selecting a ULIP-based pension plan,it is always a good idea to go with the one that allows unlimited free switches in a year and does not levy any policy administration charges. MaxLife’s Platinum Wealth Plan and HDFC’s Click2Invest plan falls in these categories. Further, the Platinum Wealth Plan allows you to secure the future of your wife by providing “Partner Care Rider”.
However,before selecting your desired plan make sure you research and compare the available options online. Opt for the plan that offers flexible premium payment options, low charges to boost your returns and ample choice of funds and investment strategies.
In conclusion, we can say that ULIPs are the best choice to go with especially if you are looking to reap the benefits and life coverage that comes with it, unlike the traditional pension plans.