Top 5 Pension Plans for Senior Citizens

 Top 5 Pension Plans for Senior Citizens

The cost of living is going up. Keeping up with it, though cumbersome, is essential so that we don’t have to compromise on the plans we have for ourselves in the future. One such inevitable future that we often seem to forget, while we are busy focusing on our bucket list, is retirement. Planning for your retirement, early in your life, can save you the unnecessary hassles and provide you the opportunity to enjoy the fruits of your hard work without compromising on your standard of living.

How do you do plan for your retirement?

The simple answer is to save money. The smart answer is to save money in a way so that it can grow.

With the average retirement age between 55 to 66 years of age, starting early is imperative in order to save more. Using a retirement calculator, you can get an idea about the amount of money you would need to save today so as to ensure that you have a worry-free retired life. You would then need to invest in a suitable pension plan that can earn you the best returns. Some of the popular pension plans are listed below.

NPS- The National Pension System is a potable, tax-efficient pension plan. It is prudently regulated by the PFRDA, which practices transparent investment with regular performance review and monitoring of fund buy the Pension fund manager. The asset allocation can be viewed on the manager’s website, and the cost of operation is minimal. On attaining the retirement age, 40 per cent of the amount Is required to be used to purchase a life annuity from a life insurance company regulated by the IRDA. The remaining amount can be withdrawn as a lump sum or in a phased manner.

SCSS- Senior Citizen Saving Scheme or SCSS is a pension plan for senior citizen that comes with a tenure of five years which is further expandable after maturity for a period of three years. The interest rate, however, remains same throughout the entire tenure and is payable quarterly. There is also room for premature withdrawals. The interest rate you earn for SCSS is taxable, but you can get tax benefits for the capital invested under Section 80C.

Mutual Funds- It is important to take into account the inflation costs so that the income earned after retirement is sufficient to accommodate your lifestyle. Equity-backed products can be a good place to invest in to earn higher inflation-adjusted returns. Based on your risk, you can diversify between small-cap, mid-cap, and large-cap funds, to ensure regular returns. The taxation of profits is less, and the tax benefits are better than FDs when it comes to investors who fall in the highest tax bracket.

ULPP- Unit Linked Pension Plans or ULPPs are specially designed market-linked products suited for retirement needs. 35 years is the minimum age limit for investing in ULPPs. The payment term and the policy term are the same and is in multiples of five, varying from 5 to 30 years. Depending on the risk profile, investors can decide on the per cent allocation of the fund. It can either be 100 per cent equity, or 100 per cent debt, or a mix of the two. With life cycle changes, you can switch the asset allocation too, to earn the best returns post-retirement. By starting early, you can leverage your capacity to invest in high-risk plans for accumulating a robust retirement corpus at the end of your pension plan.

Annuity- Annuity is a type of pension plan in which the lump sum you invest with the insurance company is reinvested, and the returns earned from it are paid back to you. This gives you access to regular income past your retirement age.

So which one should you choose?

While each of the options mentioned above have their pros and cons, pension plans by insurance companies, such as Unit Linked Pension Plans or annuities, can be your go-to options when it comes to planning for life after retirement. Insurance companies ensure effective management of your funds both at the time of fund accumulation as well as after retirement. Also, with the significant yields generated on the investments, you can enjoy uninterrupted financial support through all the years after retirement.

Working tirelessly through all the rough days, you look forward to your retirement when you will finally get to enjoy the peace without a worry in mind. However, without proper retirement planning, you could fall into unnecessary chaos owing to lack of sufficient retirement funds to sail you through your old age. So be smart and plan out your retirement goals and invest in a suitable pension plan that will help you live life on your own terms.

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