RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Things to know about pension plans

down-arrow
December 07, 2022

You don’t plan your retirement on the last day at work. You obviously think over it since the beginning of time, and invest in what you feel will suit you best. Mostly, it is a pension plan that one opts for. If you have opted one for your retirement, that’s great. And, if you haven’t yet, then, you could perhaps take a cue from the following ten pointers about pension plans before taking a step.

How does a pension plan work?

The period from when you buy pension plan until you retire is known as the accumulation phase. During this time, you pay premiums that are suitably invested and be eligible for tax benefit under Sections 80C/80CCC. On retirement, you are allowed to withdraw 1/3rd of the accumulated corpus that is tax free. The remaining amount has to be utilised in buying an annuity plan, which becomes a source of your pension every month until you die. You get a pension with interest rate as per the charges applicable during that time and the money is also taxable.

The positives

You don’t need to bother your head much about this plan. What is required of you is an on-time payment of premiums. This makes you spend judiciously.

You cannot avoid annuity plans

While you get 1/3rd of the sum upon retirement, the remaining amount is a compulsory investment that you have to make in an annuity plan. This becomes a hurdle as you cannot withdraw or invest in any other product that perhaps could offer you a better return and help you finish off your important tasks at home -- a marriage, or a new home, or even settling elsewhere. Being a long-term product, pension plans can become too tricky to handle.

Not quite tax free

As you can withdraw only 1/3rd of the amount in a pension plan as tax free, it falls short of the benefits that one gets when withdrawing from a PPF or Equity Fund as you get to withdraw the whole amount as tax-free. Moreover, the monthly pension is taxable so basically what you get in hand, might not be as big as what you imagined it to be.

Lack of flexibility

Since you are stuck with one fund alone for decades, the flexibility goes for a toss. Pension plans are long-term contracts and if you think of exiting unannounced -- that may not be possible at all..

Not a diverse plan either

In shares and mutual funds, you have the scope to diversify your investment but that is restricted when it comes to a pension plan as it does not have as large a portfolio. You end up investing in only one pension plan and thus you have very few plans to depend on. However, if you would have invested the same money in several mutual funds, your portfolio would have been diverse.

Better to have your own investment portfolio

Considering the limitations that come with a pension plan, it is wiser to invest or create own investment portfolio. Moreover, in terms of returns, all the varied plans will have similar returns vis-a-vis pension plans. You have the scope to withdraw the whole amount, invest in suitable places that will offer you monthly income with a corpus that remains as is.

From all the above pointers, it is advisable that you opt for plans that will have both the flexibility and taxation benefits. Pension plans might be easier to adhere to, but come with small bagages that can make you sulk at a time when you least want it. Choose what suits you best from HDFC Life’s Click 2 Retirement Plans.

Related Article

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

Popular Calculators Popular Calculators

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.

LinkedIn profile
Author Profile Written By:
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.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

What is Family Pension?

What is Family Pension?

What is Family Pension? Explore its eligibility, benefits for government employees, retirees, widows, and tax implications. Understand the differences between regular pension and family pension.

Income Tax on Pensions: Are They Taxable?

Voluntary Retirement Scheme

Pension Payment Order: Definition, Steps, Importance

Pension Payment Order, abbreviated as PPO, is a unique 12-digit code assigned to every pensioner under the Employee Provident Fund (EPF). Read to know how to check it.

Pension Payment Order: Definition, Steps, Importance
How to enjoy smooth retirement despite inflation Previous
How Much Will You Need Once You Retire? Next
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Popular Search

Popular Searches