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?
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.
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.
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
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.
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.
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.
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 Flexi- Guaranteed+ lifelong income with regular investment
Get Guaranteed+ lifelong income starting when you want, with a gradual investment for minimum of 5 years to maximum of 15 years.
Start with an investment amount of your choice & also get a top-up option to increase your income with any surplus funds.
- A limited/regular-pay deferred annuity plan that helps you gradually build the retirement savings and provide guaranteed+ income for life
- Flexible premium paying terms and deferment periods`
- Financial security for your family even in your absence, with the Waiver of Premium feature$
- Annuity plan can cover either single or joint life&
- Meet your healthcare and lifestyle needs through additional payout options//
- Tax benefits++ as per prevailing tax laws
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 Life1 option
- Purchase Price is returned back to your nominee2
- Option to avail a loan against your policy3
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
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.
Why should I start planning for my retirement now?
at 8% inflation
Invest at 45 yrs age retirement amount will be
₹44,00,000
Invest at 45 yrs age retirement amount will be
₹74,00,000
Inflation at 7%
Power of Compounding
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 NowHow 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.
What are the steps to buy a Retirement Plan?
Below are the key steps to buy a Retirement Plan:
Define your goals:
You want to stay financially independent even during your retirement. You want to continue your current lifestyle, meet medical expenses and meet your post-retirement goals such as buying a house, traveling, pursuing a hobby, starting a new venture, and more. Defining the goals that you want to meet during your retirement can help you plan accordingly
Calculate the amount you will need:
Basis the goals you want to meet during your retirement, you need to calculate the amount that you will need to meet your goals. It is important to factor in inflation in this calculation. Knowing the amount that you will need will help you calculate the amount that you need to invest today to meet your retirement goals
Choose your retirement plan:
Look for a plan that can provide you with fixed income during your retirement. The income should be able to ensure that you achieve your post-retirement goals comfortably. In addition, check if your retirement plan offers you features such as flexibility to invest monthly, half-yearly, yearly or all at once, as per your convenience. You may also want features such as return of purchase price at maturity, cover that includes your spouse, and more. Choose a plan that meets your requirements
Purchase:
This can be done online or offline. You will need to submit relevant documents like identity and address proof, income proof, and others. Also, basis your retirement plan, you will need to pay your premiums monthly, half-yearly, yearly or all at once
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 you buy your Retirement plan from ICICI Prudential Life?
Below are some key benefits of buying a retirement plan from ICICI Prudential Life:
Multiple options:
ICICI Prudential Life offers a variety of retirement plans to choose from for every individual, irrespective of age, income or goals
Guaranteed$$ income:
ICICI Prudential Life offers you retirement plans that provide guaranteed$$ regular income after your retirement. This helps you stay financially independent even after your retirement
$$T&Cs Apply
Simplified purchase process:
You can purchase a retirement plan from the convenience of your home or office in just a few steps. The features and benefits of all plans are available online. You can compare multiple plans, check the premium, and make an unbiased decision
Types of pension plans in India
Immediate Annuity
You may opt for this option in case you are nearing your retirement.
Deferred Annuity
You may opt for this option in case you have a few years ahead of you before your retirement.
National Pension Scheme
You may opt for this scheme if you are early on in your career and have a long time ahead for your retirement.
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.
No-Risk Investment
Pension plans provide you with unconditional protection from any and all investment risks.
Insurance Cover
Most pension plans have an included insurance cover that protects you and your family from any possible financial burdens.
Option to Add Riders
You can enhance your pension plan by adding certain riders like ‘disability due to accident’ or ‘critical illness’.
Tax Benefits
Depending on the policy chosen by you, there are certain tax benefits and exemptions that you can avail of**.
More information about pension plans
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
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.
Your pension is calculated on the basis of your gender, savings accumulated, age at which the pension starts and mode of annuity.
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.
Yes, you can change the nominee of the retirement policy anytime during your life.
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.
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.
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**.
You can pay retirement plan premiums electronically using Net Banking, Credit or Debit Cards, Payment wallets, ECS linked payments and even through cheque deposits.
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.
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.
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.
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
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.
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