Retirement Plan for NRI

Why NRIs Need Dedicated Retirement Solutions?

Suppose you are currently working in Germany, but want to come back to India after retirement (60 years). That means you still have approximately 25 years to retire. The retirement location plays a significant part since, based on that, the cost of living would change. You need a customizable financial strategy, so you can factor in inflation, risk tolerance, current living costs, healthcare, emergencies, and dependents. 

Here is why NRIs need dedicated retirement solutions: 
 

• To protect your finances from the impact of inflation, you can diversify your portfolio by investing in multiple retirement plans, such as ULIPs, annuity plan and NPS. 

• Enjoy tax benefits incurred from NPS, NRE/FCNR fixed deposits. 

• In order to save your overseas earnings from currency fluctuations, repatriation is a great option. Many advisors recommend holding a part of your savings in euros or in dollars. Stable currencies will hedge such uncertainties. 

• The NRE (Non-Residential External) and NRO (Non-Resident Ordinary) accounts help NRIs to manage their finances across the globe seamlessly. 

• Continue to invest in PPF, even though NRIs cannot open a new PPF account from overseas, they can continue to invest in the existing account and reap its benefits.

Types of Retirement Plans Available for NRIs

Depending on your future financial goals, age and risk tolerance, you can choose the most suitable type of retirement plans for NRIs in India. 

Here are different types of NRI retirement plans:

1. Unit-Linked Pension Plans (ULIPs)

ULIPs are long-term insurance products that provide dual benefits of investment and insurance. The premiums towards such a plan get divided, where one part covers life, and the other portion gets invested in various market-linked funds.

NRIs can invest in multiple instruments such as debt, equity and balanced funds while receiving life coverage. That way, they can capitalise on the long-term growth through India's expanding economy. 

2. Annuity Plans for NRIs (Immediate & Deferred)

An annuity plan is a contract between an insurer and an annuitant. These assist in meeting the financial goals of the annuitant with a regular income during retirement. By starting with small investments early, NRIs can build a substantial retirement corpus over time. 

An NRO account is mandatory to invest in such plans for NRIs. These plans not only enable them to save money systematically, but also allow them the flexibility to choose the payouts on a monthly, quarterly and annual basis. 

3. National Pension Scheme (NPS) for NRIs

NPS is a retirement-driven savings scheme which enables NRIs to earn market-linked returns to create a regular source of income post-retirement. In this scheme, NRIs can invest annually in NPS Tier 1 accounts until maturity, and once the plan matures, they can receive guaranteed pensions for life.  

4. Other Government-Backed and Social Security Schemes for NRIs

Other government-backed retirement plans for NRIs include EPF (Employees' Provident Fund), Atal Pension Yojana (APY), and Pradhan Mantri Vaya Vandana Yojana (PMVVY). 

EPF is a type of social security retirement benefit scheme that allows employees and employers to contribute part of their salary, and before emigrating, the employees can withdraw their funds. 

APY and PMVVY are government-backed pension schemes. APY is most suitable for those who work in unorganized sectors and have an Indian bank account. PMVVY, on the other hand, is an excellent choice for senior citizens.

Which Plan Should an NRI Choose?

Check out this table to find the most suitable retirement plan for you:

• Choose an annuity if you prefer low-risk fixed income that is taxable yet provides a guarantee. 

• Choose NPS if you are willing to take a moderate risk and market-linked income with tax advantages. 

• ULIPs are best for NRIs who want dual benefits of both flexibility and growth. 

• MGPSY is a low-risk, savings-based pension scheme perfect for NRIs who prioritize social security. 

Comparison Table: Best Retirement Plan Options for NRIs

Features of NRI Retirement Plans

Retirement planning has two phases: 

• The first is the contribution phase, when the foundation is established and NRIs start to participate actively in saving and investing. 

• The second phase is distribution, when they start to enjoy their retirement investment.   

Here are some of the features of retirement plans for NRIs:

1. Flexibility in Contributions 

NRIs have the flexibility to choose between regular or lump sum premium contributions. Not only that, they have full freedom to choose policy tenures too. This allows them to stay aligned with their earning patterns abroad. 

2. Currency Options 

Currency movements across borders are crucial when it comes to financial planning. You can choose to invest in either INR or other stable currencies, such as Euros or dollars, doing that; will help in managing forex risks. Financial experts recommend that advanced investors invest in currency futures or options. These help in managing currency volatility.

3. Multiple Payout Modes 

How you choose to receive the retirement payout depends on your type of pension plan and your future goals. The best retirement plan provide flexibility to choose from various payout modes. 

For example, if you choose a monthly payout from a deferred annuity, you can expect a steady and fixed monthly income for a predetermined period. On the other hand, if you choose a lump sum payout, you will receive a significant portion of your pension corpus at one time and utilise it according to your preferences.

4. Investment-Linked & Guaranteed Options

Depending on which retirement plan you choose, the returns vary. For example, if you choose ULIPs, which are life insurance products with market-linked investment features, the returns will depend on how your instrument performs in the market. Similarly, investing in annuity plans will ensure guaranteed income since it is a non-linked financial instrument. However, the return potential from a ULIP is higher compared to an annuity.  

5. Global Accessibility

Global accessibility is one of the best features of NRI retirement plans. No matter which country you are residing in, you can easily access your retirement funds and customize your investment portfolio smoothly. Whether you want to contribute or withdraw, it will be seamless. In this context, transparency plays a significant role, so choose your retirement plan provider wisely.

6.  Portability 

Portability refers to the ability to maintain and manage an NRI retirement account. Retirement plans like NPS offer uninterrupted transfer across borders as long as the transfer is taking place via an NRO or an NRE account. This is a unique trait which many other financial instruments lack.

How to Buy a Retirement Plan in India as an NRI

After determining your retirement age (50 to 60 years) and life expectancy, you can set a tentative financial goal based on your current expenses and inflation. You need to compare different plans as per your preference while choosing the most eligible retirement plan provider, and arrange the necessary documents. 

Here is a step-by-step guide to purchasing an HDFC Life retirement plan online: 

Step 1: Visit this page to go to the retirement and pension plan page of HDFC Life.

Step 2: Fill in basic details such as name, DOB, gender, and annual income. 

Step 3: Specify whether you want to invest a lump sum or not, and enter your phone number and email ID.

Step 4: Based on your selection, you will receive the retirement plan details you are eligible for.  

Step 5: You can specify the payout option you would prefer in this section.

Step 6: Once you choose your preferred plan, you will get the premium amount. 

Step 7: You can utilise the online calculator to check the premium.

Step 8: Upload documents such as passport, visa or residential permit, KYC and NRE or NRO Account details.

Step 9: Pay the necessary amount requirements

Step 10: Once the payment is complete, you will receive the details of the purchase via mail. 

Step 11: Monitor your retirement plan regularly

Please note: When you face any kind of glitch while purchasing a retirement plan from HDFC Life, you can utilise the live chat EVA option for instant support or contact an advisor.

Summary 

Retirement plans for NRIs offer stability even when you do not have a regular income source. However, it can be challenging to find a trustworthy and reliable plan. There is no cookie-cutter approach to this; depending on your personal financial goals and means, you need to figure out what works best for you. A single mistake could be expensive. So, researching all your relevant options before investing is the key to success.

Check out our retirement plan HDFC Life Sanchay Aajeevan Guaranteed Advantage^{^} 

Note: If assessee has opted for Old tax regime, assessee shall be eligible to claim deduction under chapter VI-A (like Sections 80C, 80D, 80CCC, etc) of the Income Tax Act, 1961. If assessee has opted for New tax regime only few deductions under Chapter VI-A such as Sections 80JJAA, 80CCD(2), 80CCH(2)of the Income Tax Act, 1961 are available.