Pensions, can be described as a fund where a certain percentage of an individual’s money is added up over the years of their employment to ensure that they have access to a healthy stream of income after they have entered their golden years. India has provided a lot of schemes and plans that ensure the health and wealth of our beloved senior citizens. Today we will be covering in-depth the topic of pension funds, their importance as you grow older, and the freedom it brings even after your retirement.
Pension funds come with numerous benefits that include tax benefits, health care benefits, travel facilities, etc. We will be studying what these listed benefits offer. Our government pension funds have given us diverse reasons to enrol so that we can obtain the fruits of our labor even after our retirement.
Pension plans are tailored for the elderly as an investment plan where a part of your savings is taken from your income and allotted as a monthly income after your retirement. This way, our senior citizens have an ensured sum coming in as a monthly payment. The ensured sum acts as a regular stream of money ideally planned and tailored to one’s needs.
Pension Plans, who are they most ideal for?
Pension plans are ideally suited for anyone looking to secure their future after their retirement to get a secure monthly flow of income. As you know, there are a lot of pension plans, and before you select a plan, it is important that you research thoroughly before selecting the plan that suits you the most.
Leading Pension Plans in India
- Immediate Annuity: This pension plan allows the citizen to a pre-fixed amount as a lump-sum investment and the process of starting is rather instant. The citizens paying premiums towards plans like the Vridha pension for seniors can be well exempted from Income Tax. In the case of the untimely passing away of the applicant, their elected nominee can avail of the benefits of the plan.
These plans come along with several other annuity options, such as:
- Life Annuity: A life annuity declares that the investor has to be paid the monthly pension till the policyholder’s death. Moreover, if the investor decides on the option of adding his/her significant other into the plan, therefore, the pension is also paid to the investor’s significant other.
- Annuity Certain: Also more popularly known as Guaranteed Period Annuity ensures the investor/policyholder a regular flow of income as a pension throughout the policyholder’s choosing if in case of the policyholder’s death before this period is completed, then the selected nominee gets the pension for the rest of the period. These plans are usually laid out in multiples of 5 years, starting from 5 up until 20 years. This income will not be interrupted even if the policyholder dies.
- Deferred Annuity: Deferred Annuity is when the total amount is accumulated regardless of whether it is done as a single premium or over extended sets of payments overtime through the completion of the term the policy entails, that is when the pension flow starts. A deferred annuity brings in a lot of benefits along with tax exemption.
- National Pension Scheme (NPS): The Nation Pension Scheme in India was introduced by the Indian Government for the regular folk to ensure that over their years of income, a plan collects a certain amount for safekeeping that will help them after their retirement. The NPS now provides the option of investing a certain percentage of their money in debt as well as the equity market based on their preference. You can also choose to take out up to 60% of the money that they have invested in the policy, and the rest of the amount can be used to purchase the said annuity.
- Pension Plans with Cover: Pension plans that come with the cover, on the death of the policyholder, offer to pay a lump sum to the beneficiary of the policy. The payable amount in such plans isn’t very high.
- Pension Plans without Cover: As in the case of a pension plan without cover, no life cover is offered to the insured individual. Hence, when the policyholder dies the nominee only gets the Corpus or the amount stored (till the date of death).
- Pension Funds: Pension funds such as PPF are the most popular pension plans out there. Pension funds bring out great benefits to the policyholder i.e. better return on maturity when compared to other plans.
Indira Gandhi National Old Age Pension Scheme
The Indian Government implemented the IGNOAP scheme to provide a certain amount of Welfare every month to the senior citizens who do not possess a set monthly income.
To be eligible for this scheme, the citizen must be over the age of 60 and must be Below Poverty Line (BPL).
The Pension can vary between 600 – 1000 INR depending on the variable state share planned out by the scheme.
How to apply
Here is a list of steps one must follow when applying for the scheme and availing of its benefits.
- The senior citizens of the rural population must visit the Block Development Office concerning the area and the urban citizens must visit their concerning District’s authority of Social Welfare
- The concerned authority will then provide you with an application form that you will need to fill with the correct details, these include –
– Your place of residence with your precise area details.
– Name of the village authority, can also be the panchayat
– Name of the society
– Name of your beneficiary
– Name of your Inheritor
– House address
– Your biological gender
– Your Age along with your correct Date of Birth
– A copy of your Birth certificate
– Income certificate along with state-issued Below Poverty Line (BPL) card.
– Domicile certificate
– Proof of Issuance along with the said certificate
– Number of your Election card
Along with the duly filled form, you must also submit certain documents that support your claim to the pension scheme. The application form along with the concerned documents will be submitted to verify your eligibility and claim. The verification is quite thorough and after complete verification, your application will be recommended to the Sanction committee that authorizes the monthly payments. The list of documents you need to provide along with the filled-out application form is –
BPL card, Photographs, Aadhaar Number, Bank Pass Book, and Age proof certificate.
Advantages of Old Age Pension Plans
- An assured income flow throughout your retired years.
- Through a pension plan, senior citizens can have a relaxed point of view on their life and still maintain their healthy lifestyle. When you are selecting a pension plan, you must do the well-needed research and select a plan that caters to your needs. Always calculate the returns that you will get through each plan and hand-select the most suited one for you.
- Pension plans are quite liquid as compared to many other investment opportunities. Through a pension plan not only are you secure in your later years but you can always be assured that the accumulated amount can be easily withdrawn, to be prepared against unforeseen circumstances that require sudden payments. The state of its financial liquidity is one of the reasons why pension plans are popular.
- Pension plans for the senior citizens also known as Vridha plans in India have added death benefits where the nominee of the policyholder is ensured, so in the case of the policyholder’s untimely demise, receives monthly payments. The death benefit can total up to 105% of the amount paid by the holder before the demise.
- The payments made to the old-age pension bring in tax benefits, where the payments up to 1.5 lakh INR can be exempted under section 80C of the Income Tax act of 1961. Sections such as 80CCC and 80CCD bring in separate benefits that you can look up or ask the concerned authority while selecting your plan.
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Frequently Asked Questions
Senior citizens over the age of 60 years can apply for old age pension funds, but there are a few plans like the Indira Gandhi National Old Age Pension Scheme where not only do you need to be over the age of 60, but also the citizen must come under the Below Poverty line (BPL).
You can only get an online statement if you have an Internet banking ID and password. The pension plan that you select must be linked to your savings or a current bank account that involves internet banking. This way you can easily get your pension statement online.