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How to Choose the Right Pension Plan?

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How to Choose the Right Pension Plan?
August 30, 2023

Table of Contents

 

A pension plan is a type of life insurance plan that offers two distinct benefits to the policyholder — a life cover as well as regular pension payouts post-retirement. If you are in the process of planning for the retirement phase of your life, it may be beneficial to consider investing in a pension plan because you can take care of two essential financial requirements with one product.

But what are the different aspects that you need to consider when choosing a pension plan? Let’s find out.

5 Important Things to Consider Before Buying a Pension Plan

To select the right pension plan for your future and make the right choice, there are some essential aspects that you need to consider.

Here’s a closer look at how you can choose the right policy by factoring in the following aspects:

The Amount of Pension Payouts

Check the amount of pension that you will receive from your preferred pension policy. Ideally, it should be enough to cover your basic expenses after you retire. If you have income from other investments, the pension from the policy can supplement such income, so you can live a comfortable post-retirement life.

The Vesting Period

The vesting period is the duration after which you will start receiving your pension payouts. In this context, the vesting age (which is the age at which you will start receiving your pension payouts) is also crucial. This duration should align with the number of working years you have left, and the vesting age should be around the same as your retirement age.

The Type of Pension Plan

Depending on when the pension payouts begin, there are different types of pension plans. An immediate annuity plan may be suitable if you are already at the threshold of retiring, but a deferred annuity plan is a better choice if you are still in your working years. Consider these aspects before you choose a pension plan for your future.

The Flexibility Offered

Your pension plan should also be flexible enough to align with your financial goals and your current financial situation. Look for policies that allow you to choose the life cover you require. Also, check for flexibility in terms of premium payment modes, frequency, and the like. This will make it easier to pay your premiums on time, so your policy can remain active.

The Terms and Conditions of the Policy

In addition to the above factors, you must also read the fine print of your preferred pension plans to make an informed choice. This will help you understand various aspects and features of the policy you choose, like its surrender value, the premium and other charges involved, the tax benefits on the premiums and pension payouts and other hidden clauses in the plan.

Conclusion

This sums up how you can find a pension plan that aligns with your financial requirements. Often, people put off purchasing an annuity policy until later in life, because a pension is only required after retirement. However, it is advisable to buy a pension plan early in life, so you can lock in lower premium rates and get the benefit of a life cover right from your 20s or 30s, as the case may be.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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