What are Pension Plans/Retirement Plans?

Retirement Plans are a category of life/annuity plans that are specially designed to meet your post-retirement needs such as medical and living expenses. To ensure that you can enjoy your golden years with financial independence, these policies help you plan for your expenses and secure your future.

Why do I need to plan for my retirement?

  • Increasing retirement years:

    With average life expectancy increasing in India, it has become increasingly important to plan for a longer retirement. The life expectancy figures indicate how long an average individual lives. In India, the average life expectancy of a person aged 60 is 18.022 years. This means that an average Indian lives up to the age of 78. Hence, you need to start planning in advance to maintain your lifestyle and take care of other expenses for such a long duration.
  • Medical expenses:

    A major worry with increasing age is unforeseen medical expenses. Rising medical costs can be difficult to manage unless you plan for them in advance.
  • Financial independence post retirement:

    You would like to live your life on your own terms after your retirement. However, more than 65%^^ individuals above the age of 60 depend on others for their daily expenses. This shows how important it is to plan for your retirement and ensure your financial independence.

^^As per the 'Situation Analysis of The Elderly in India' report of Ministry of Statistics and Programme Implementation (MOSPI)

Benefits of Retirement Plans:

  • Guaranteed regular income for life:

    With Retirement plans, you and your spouse can receive regular pension for life.
  • Security for your children in your absence:

    In some retirement plans, your children will receive a lump-sum amount in the absence of both you and your spouse. This helps you leave behind a legacy for your children.
  • Tax benefits:

    Apart from enjoying a comfortable retirement, you can also enjoy tax benefits** on the premium paid up to a limit of ₹ 1.5 lakh.

No matter what your need is, we have a solution

View details of our Retirement plans:

Deferred Annuity
Get a guaranteed income for life with the option to defer income by upto 10 years. You also have a choice of getting back your purchase price on diagnosis of a Critical illness (CI) or Permanent Disability due to accident (PD) and use it for treatment~

  • Single premium plan to get guaranteed income for life with the option to defer income by upto 10 years
  • Lock in the current interest rates for the annuity to be received later
  • Annuity plan can cover either single or joint life*
  • Flexible payout options to suit your need#
  • Tax benefits^ on premium paid u/s 80CCC of Income Tax Act, 1961

Immediate Annuity
Get a guaranteed income for life immediately. You also have a choice of getting back your purchase price in your survival years1

  • Single premium plan to get guaranteed income immediately for the rest of your life
  • Annuity plan can cover either single or joint life*
  • Flexible payout options to suit your need#
  • Tax benefits^ on premium paid u/s 80CCC of Income Tax Act, 1961
  • Purchase annuities from your savings or accumulated NPS corpus

A plan that provides regular income for you in your golden years with the potential growth of equity and debt funds, and also ensuring that you do not lose your money no matter what.*

  • Choice of investment strategy that suits your needs
  • Guarantee on the money you invest
  • Pension Boosters to increase your retirement savings
* Assured Benefit amount assumes all due premiums as per the premium payment term are paid.

Get a guaranteed income for life immediately with the choice to opt for single life or joint life option.

  • Pay just once and get a guaranteed lifelong income
  • Continue pension for spouse after you with the Joint Life1 option
  • Purchase Price is returned back to your nominee2
  • Option to avail a loan against your policy3

How much do I need to save for retirement?

It is important to consider your financial requirements after retirement to calculate the retirement kitty that will suit your needs. You must decide the amount required to maintain your lifestyle as well as take care of your increased medical expenses.

Why should I start planning for my retirement now?

  • Power of Compounding:

    If you start saving early, your money will get more time to grow. For example, if you start investing ₹ 1.5 lakh p.a. at the age of 45, your retirement savings will be ₹ 44 lakh at a rate of 8% or ₹ 31 lakh at a rate of 4%, by the time you are 60 years. However, if you had started saving the same amount from the age of 40, your retirement savings at 60 would be ₹ 74 lakh at 8% interest rate and ₹ 46 lakh at 4% interest rate.
  • Increasing Inflation:

    After retirement, you will need regular income to meet your expenses.The later you start saving for your retirement, the more you will need to save. For example, if your monthly expenses are ₹ 35,000 at the age of 30, then by the age of 60, they will be ₹ 2.66 lakh## due to inflation. To meet these expenses, your retirement savings will need a monthly contribution of ₹ 27,000. However, if you delay your savings by just five years, this amount will increase to ₹ 42,500 per month.

How do pension plans work?

Upon retiring, your regular income flow dries up and meeting day to day expenses can become a problem. A pension plan ensures that your income flow continues well beyond your retirement. Pension plans let you accumulate a corpus of funds through a lump sum investment or premiums that you pay over a period of time. Upon retirement, you receive regular payments from your corpus to ensure that the expenses can be met and your future is secure.

Types of pension plans in India

  • Immediate Annuity:

    Your pension begins almost immediately after a policy is purchased and a lump sum amount has been deposited by you.
  • Deferred Annuity:

    A corpus can be accumulated over a policy term up to a period of 10 years through regular premiums and your pension starts after the term is over.
  • Joint Life Annuity:

    Your pension is paid to you for your lifetime. In case of an unfortunate event, your spouse is entitled to the pension.
  • National Pension Scheme:

    You can invest regularly to build a corpus, at the time of maturity you can withdraw up to 60% of the amount as lump sum and purchase an annuity plan with the remaining corpus to receive lifelong income.

Benefits of pension plans

  • Regular Income Post Retirement:

    You receive a guaranteed amount of money on a regular basis after you have retired from work.
  • Insurance Cover:

    Most pension plans have an included insurance cover that protects you and your family from any possible financial burdens.
  • Tax Benefits:

    Depending on the policy chosen by you, there are certain tax benefits and exemptions that you can avail of**.
  • No-Risk Investment:

    Pension plans provide you with unconditional protection from any and all investment risks.
  • Option to Add Riders:

    You can enhance your pension plan by adding certain riders like 'disability due to accident' or 'critical illness'.

Features of Pension Plans

  • Annuity:

    The most important feature of a pension, it is the regular payment that you receive from your lump-sum investment.
  • Vesting Age:

    The vesting age is the particular age at which you start receiving your pension payments.
  • Accumulation Period:

    This refers to the entire period in which you pay premiums towards the accumulation of a corpus.
  • Payment Period:

    The payment period is the entire period during which you will receive the pension after your retirement.
  • Surrender Value:

    This is the amount you will receive if you choose to surrender the pension plan before its due date.

Factors to consider while buying Pension Plans

  • Monthly Expenses:

    Once you retire and a regular source of income is over, your pension needs to cover all monthly expenses.
  • Inflation:

    You need to consider inflation because the cost of various day to day things are bound to rise in the future.
  • Life Expectancy:

    Your pension should ensure that money won’t run out for the remainder of your retired life.
  • Medical Expenses:

    Money can be needed for health checkups and any unforeseen medical treatments.
  • Outstanding Loans:

    Any outstanding loans need to be considered as they can take a sizeable chunk out of your pension.

Eligibility criteria for Pension Plans

  • Minimum and Maximum Entry Age:

    For most pension plans, the minimum age of entry is generally 18 while the maximum entry age is 70.
  • Minimum and Maximum Vesting Age:

    The minimum vesting age is 30 years while the maximum age is 80 years.
  • Policy Term:

    Depending on the chosen pension plans the policy term generally ranges from 10 years to 30 years.
  • Annual Premium Amount:

    There is no maximum limit, and the minimum annual premium amount is close to ₹ 50,000/- in most cases.
  • Premium Payment Term:

    Generally, the premium has to be paid for the same period as that of the chosen policy term.

Documents required to buy a Pension Plan in India

  • Document for Age Proof:

    Birth Certificate/Passport/Driving License/Voter ID Card/High School Certificate.
  • Document for Identity Proof:

    Aadhaar Card/Passport/Driving License/Voter ID Card/PAN Card.
  • Document for Address Proof:

    Aadhaar Card/Passport/Driving License/Ration Card/Electricity Bill/Telephone Bill.
  • Document for Income Proof:

    Bank Statement Slip/Salary Slip/Income Tax Return File.
  • Medical Reports:

    Some insurance providers may ask for medical reports before you can buy a pension plan from them.

FAQs

⭐ What is 'Pension'?

A pension is a fund into which a sum of money can be added during your employment years and you can draw periodic payments from this fund once you have retired. This way, a pension continues to provide an income to support you even after your retirement.

⭐ How is my pension calculated?

Your pension is calculated on the basis of your gender, savings accumulated, age at which the pension starts and mode of annuity.

⭐ Can a person have multiple pension plans?

Yes. A person can have multiple pension plans with private banks and other commercial pension plan policy providers. However, when it comes to the National Pension Scheme or other pension schemes by the Government of India, a person cannot have more than one.

⭐ Can I change the nominee of the retirement policy?

Yes, you can change the nominee of the retirement policy anytime during your life.

⭐ What are the tax benefits accompanying pension plans in India?

Depending on the type of plan chosen, pension plans in India provide certain tax benefits. In most cases, any contributions towards a pension fund can be deducted from your gross income leading to tax savings. At the time of maturity, you can also withdraw up to 60% of your accumulated corpus without paying any tax*.

⭐ How can I pay retirement plan premiums?

You can pay retirement plan premiums electronically using Net Banking, Credit or Debit Cards, Payment wallets, ECS linked payments and even through cheque deposits.

⭐ What is participating and a non-participating pension plan?

A participating plan enables the policyholder to share the profits of the insurance company in the form of bonuses or dividends. In a non-participating plan, the profits are not shared and no dividends are paid to the policyholder. Both these types of plans provide guaranteed life cover.

⭐ Should I save for my retirement or my child's education first?

You can start saving for your retirement as early as you start earning. This ensures that there is no stress during the latter half of your working life. Investment for your child’s education can start from the child’s birth and can run parallel with the investment for retirement.

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Disclaimers

**Tax benefits under the policy are subject to conditions under Section 80CCC, 10(10A) and other provisions of the Income Tax Act, 1961. Applicable taxes will be charged extra as per prevailing rates. Tax laws are subject to amendments made from time to time. Please consult your tax advisor before acting on above.
2 Source: https://knoema.com/atlas/India/topics/Demographics/Age/Life-expectancy-at-age-60-years.
##Assuming inflation at 7%
ICICI Pru Guaranteed Pension Plan
1There are 3 Annuity options available where you can get back your premium while you are alive, after attaining a certain age. To know more in details, please refer the product brochure
*Joint Life can be either the spouse/child/parent or sibling of the Primary Annuitant.
#You have an option to choose from 8 Immediate Annuity and 3 Deferred Annuity options. To know more about the options in detail, please refer the product brochure
~To know more about the exclusions and T&Cs of Critical Illness and Permanent Disability, please refer the product brochure
^Tax benefits under the policy are subject to conditions under Section 80CCC, 115BAC and other provisions of the Income Tax Act,1961. Good and Service tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above
ICICI Pru Saral Pension Plan
1Under Joint Life option the Secondary Annuitant shall be the Spouse of the Primary Annuitant.
2 The purchase price, i.e., the price with which you bought the plan is returned to your nominee in case of an unfortunate event. Please refer the product brochure for more details.
3Please refer the product brochure for more details.
ICICI Pru Guaranteed Pension Plan UIN 105N181V01, ICICI Pru Easy Retirement UIN 105L133V03, ICICI Pru Saral Pension UIN 105N184V01
W/II/3774/2021-22