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. You would want to maintain the same lifestyle post retirement. There could be an increase in your day-to-day expenses due to an increase in inflation. You would also have post-retirement dreams such as travelling the world, pursuing a hobby, starting a new venture, and more. By planning in advance, you can be financially prepared for your retirement.

This is where pension plans/retirement plans come in. Both pension plans and retirement plans are a category of life insurance plans that are specially designed to meet your post-retirement needs. To ensure that you can enjoy your golden years with financial independence, these plans help cover 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:

  • Benefit from the power of compounding: The earlier you invest in a retirement plan, the longer your money gets to grow. Also, the interest earned over time gets re-invested to generate more returns. This is called the power of compounding. This provides you a larger amount for your retirement
  • Safety net from unexpected events: Retirement plans ensure that you are financially prepared in case of an emergency. They also provide financial support in case of critical illnesses or permanent disability due to an accident
 
  • 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 U/S 80CCC AND 10(10A):

    Apart from enjoying a comfortable retirement, you can also enjoy tax benefits** on the premium paid up to a limit of ₹ 1.5 lakh.
 
**Tax benefits are subject to conditions under Section 80CCC and 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 from time to time.

4 ways to pass on your retirement plan money to your family

1

ENTER CORRECT NOMINEE DETAILS

Provide correct nominee details to ensure your nominee receives the money, in case of your demise during the policy term. Ideally, make your spouse or child the nominee.

2

INFORM YOUR NOMINEE ABOUT THE POLICY

Ensure your nominee is aware about your plan and share key policy details. (e.g. Policy Number), so that he/she can get the claim amount without hassle.

3

BUY THE RIGHT ANNUITY PLAN TO SECURE YOUR SPOUSE

For e.g. you can secure your spouse's future by opting for a joint life annuity plan. Regular income will be provided to your spouse after your demise.

4

BUY AN ANNUITY PLAN THAT CAN HELP YOUR CHILDREN

For e.g. you can buy an annuity with return of purchase price. You will receive regular income as long as you live. After you, your children will get back the initial lump sum paid by you.

 

No matter what your need is, we have a solution

ICICI Pru Gua₹anteed Pension Plan - 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~.

KEY FEATURES
  • 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

ICICI Pru Gua₹anteed Pension Plan - IMMEDIATE ANNUITY

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

KEY FEATURES
  • 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

ICICI Pru SARAL PENSION - A Non-linked Non-participating Single Premium Individual Immediate Annuity Plan

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

KEY FEATURES
  • Pay just once and get a guaranteed lifelong income
  • Continue pension for spouse after you with the Joint Life1option
  • 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?

When you retire, your regular income stops. However, even during retirement, you would want to maintain your existing lifestyle and be able to support your family. In addition, there could be increased medical expenses. Hence, it is important to calculate your financial requirements for retirement so that you can be prepared well in advance. It is difficult to determine the exact amount you will require post-retirement, however, below are a few factors that you can consider to arrive at the amount:

  • Your day-to-day expenses – This will give you an understanding of how much amount you would need to maintain your current lifestyle even post retirement
  • Events and milestones during retirement – There could be financial responsibilities even during retirement, such as paying for children’s higher education or wedding, and more. It is important to include these costs while planning for retirement
  • Your post-retirement dreams – You may have dreams that you would want to fulfil post retirement, such as traveling, starting your own venture, and more. These would require a significant amount and hence, it is necessary to include these while calculating the amount you would need during your retirement
  • Unforeseen costs – While planning for retirement, you should keep some amount aside for any uncertainty, such as medical expenses, or any financial emergency
  • Inflation – This leads to an increase in the costs of goods and services, which requires you to pay an additional amount to consume the same goods and services at a later period. For example, if your current expenses amount to ₹ 6 lakh annually at the age of 45, to maintain the same lifestyle post retirement, you would require ₹ 14.38 lakh annually at the age of 60 assuming 6% inflation year-on-year. Hence, while calculating the amount you would need for your retirement, it is important to factor in inflation as well

You can also use the our Retirement planning calculator to calculate the amount you need to save for your retirement.

How do I choose a pension plan?

It is important to have enough money to ensure your financial freedom during your golden years. Basis your post-retirement dreams and goals, you may require the money either in the form of a lump sum, a regular income, or both. Understanding the below factors will help you choose the right pension plan that will best suit your requirements.

  • Returns from the plan – It is ideal to look for plans which offer higher returns. A plan that you invest in, should provide high returns and be able to cover your post-retirement needs
  • Guaranteed pension – Risk appetite decreases with age. For your retirement, you may want to invest in a plan that provides guaranteed returns, free from market fluctuations. This will help ensure that your post-retirement goals are fulfilled, no matter what. Some plans offer guaranteed pension not just to the policyholder but also to the spouse in the event of an unfortunate event. Such plans ensure financial independence for you and your loved ones
  • Flexibility – As you move closer to your retirement, you may want to do more than what you planned at the time of purchasing the pension plan. This may require you to increase your investment towards the plan. Look for a plan that gives you the option to increase your premium contribution through top-ups. Also, look for features such as flexibility in paying premiums (monthly, half-yearly, yearly), multiple payout options, and more
  • Bonus and other benefits – Most retirement plans offer bonuses and benefits for staying invested. These bonuses and benefits that you get over the years will add to the returns from the plan and provide you with a larger retirement fund. Hence, it can be beneficial to go for a plan that provides you with these benefits

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.
    ##Assuming inflation at 7%
Calculate Now

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

COMP/DOC/Dec/2021/2012/7105

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 or Life long income

    It is the regular payment that you receive from your investment. You get this income throughout your retirement.
  • Vesting Age

    The vesting age is the age at which you start receiving your pension payments. You may choose to start getting the income immediately or at a later date.
  • Accumulation Period

    This refers to the entire period in which you pay premiums towards the pension plan. For example, if you start investing in a pension plan at the age of 40 till the age of 60, then the accumulation period is 20 years.
  • Payment Period

    The payment period is the entire period during which you will receive the pension after your retirement. For example, if you retire at 60 and receive your pension till the age of 80, then the payment period is 20 years.

Factors to consider while buying Pension Plans

  • It should cover your expenses post retirement

    Once you retire and your regular source of income stops, your pension needs to cover all your expenses. This includes your day-to-day expenses, travel expenses, your child’s education, wedding expenses, and more.
  • It should provide inflation-beating returns

    As time passes, with rising inflation, the cost of goods and services increase. This means that you will need a larger amount to maintain even the same standard of living post retirement. Thus, you should look for a plan that provides returns that can cover for inflation as well.
  • It should provide income for life

    As the regular income stops during retirement, it is important that the pension plan covers all your expenses for life. There are pension plans that offer annuity payments throughout your life. This will help you stay financially prepared to meet your post retirement expenses.
  • It should cover medical emergencies

    It is important that your pension plan provides you financial cover in case of a medical emergency. Some pension plans provide financial protection against critical illnesses and disability due to an accident. This can be helpful in case of a medical emergency during retirement.

When is the right time to invest in a pension plan?

You can invest in pension plans any time as per your requirements and convenience. However, the sooner you invest, the better it is. You will have more time to contribute to your retirement savings and allow your money to grow. Also, if you invest early, you can contribute lower amounts over time as compared to when you are older. This way, you will be able to invest a large amount for your retirement over time without impacting your current budget

COMP/DOC/Dec/2021/2712/7142

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.
  • Annual Premium Amount

    There is no maximum limit, and the minimum annual premium amount is close to ₹ 50,000/- in most cases.
  • Minimum and Maximum Vesting Age

    The minimum vesting age is 30 years while the maximum age is 80 years.
  • Premium Payment Term

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

    Depending on the chosen pension plans the policy term generally ranges from 10 years to 30 years.

Documents required to buy a Pension Plan in India

  • Age Proof

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

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

    Aadhaar Card/Passport/Driving License/Ration Card/Electricity Bill/Telephone Bill.
  • 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, you can purchase more than one pension plan for yourself. There is no restriction on the number of pension plans that you can purchase. However, you can claim deduction against the premiums paid towards the plans only upto ₹ 1.5 lakh per annum under Section 80CCC* of the Income Tax Act, 1961.

⭐ 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.

⭐ Can I cancel my retirement plan and get the money?

Yes, you can surrender your retirement plan and get the surrender value. The amount is decided basis the duration for which you were invested in the plan. This amount is commonly referred to as surrender value.

⭐ Is it better to have a retirement plan or a savings plan for retirement?

Savings and retirement plans are different instruments. Both help you save money for a fixed goal. A savings plan can be for used for long-term or short-term goals. On the other hand, retirement plans are meant specifically for retirement purposes. The features, benefits and options for savings and retirement plans vary according to their purpose. For example, a savings plan will provide you the payout for a certain duration which can be used to fulfil your goals, however, a retirement annuity plan will provide you payouts for life.

⭐ Can I take my pension at 55 and still work?

Yes, you can choose to receive your pension at any age and continue working. Pension/retirement plans provide you the option to choose when you want to start receiving the payout from the plan irrespective of your retirement date.

⭐ How can I plan financially for retirement?

Financial planning for retirement involves the following steps.

  • Start by setting a goal
  • Calculate the amount you will need to achieve your goal. It is important to factor in inflation in this calculation
  • Invest in a suitable pension plan that meets your needs
  • Reduce unnecessary expenses and debt. This will help you save and invest more for your retirement

⭐ At what age should one start retirement financial planning?

Financial planning for retirement should start as early in life as possible. Starting early offers you a longer time horizon and allows your money to grow. It also allows you to invest smaller amounts, making it easier on your pocket.

Can I take my pension at 55 and still work?

Yes, you can choose to receive your pension at any age and continue working. Pension/retirement plans provide you the option to choose when you want to start receiving the payout from the plan irrespective of your retirement date.

COMP/DOC/Feb/2022/172/7441
 

At what age should one start retirement financial planning?

Financial planning for retirement should start as early in life as possible. Starting early offers you a longer time horizon and allows your money to grow. It also allows you to invest smaller amounts, making it easier on your pocket.

COMP/DOC/May/2022/25/0160
 
ADVT NO. W/II/1212/2020-21
 

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Disclaimer

** 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.
ICICI Pru Guaranteed Pension Plan
1 There 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
1 Under 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.
3 Please refer the product brochure for more details.
ICICI Pru Guaranteed Pension Plan UIN: 105N181V02
ICICI Pru Easy Retirement UIN: 105L133V03
ICICI Pru Saral Pension UIN: 105N184V04
W/II/4872/2021-22
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The secrets of successful retirees
– the official handbook!