How to Choose the Best Pension Plan in India?

Retirement planning is one of the most sought after goals for most salaried individuals across the globe. After all, who doesn’t want to score a peaceful and prosperous retirement? Though everyone wants to live happy and content post retirement life, only a few are careful enough to plan well in advance for their retirements.

Given the existing inflation and the ever-increasing dearness, not planning your retirement well in advance may lead to a chaotic and full-of-pressure post retirement life. But you’ll be surprised to know that by simply choosing a good pension plan, you may easily score a great post retirement life.

Now, you may argue that there are virtually thousands of retirement plans and which plan should you opt for. Well, the secret is simple! You must choose a plan that’s most rewarding and offers you a lot of benefits post retirement.

To make things easier for you, here we bring to you some easy ways on how to choose the best pension plans in India. It only makes sense to keep these 7 important things in mind when planning to invest in a pension plan to ensure getting the best plan possible in the Indian Insurance sector.

7 Things to Keep in Mind When Fishing For Pension Plans in India

• Present Age-Age plays a very important role in pension planning. The earlier you will start, the more time you will get to accumulate a corpus for your pension. But in case, you’re starting late, you will need to choose a pension plan that allows you to build a huge pension corpus in a shorter span of time. 
• Intended Retirement Age– What age do you want to retire? Now, this is one question that is sure to influence your pension planning. In case, you’re planning to retire early, you will need to invest in a pension plan with great returns and huge accumulation. 
• Life Expectancy- This is yet another factor that determines the direction of your pension planning. If you and your family have high life expectancy, then you’ll need to start building a pension corpus early. And if you have a family medical history, it becomes even more important to build a pension corpus to use it for medical emergencies later. Don’t forget, due to the advancements in the world of medical sciences, the life expectancy ratio is dramatically increasing per year.
• Inflation-Okay, you probably already knows what inflation really is. But you’ll be surprised to know that inflation can quickly eat all your savings and leave you empty handed. Therefore you need to carefully consider the current and expected inflation rate when deciding on the accumulation and distribution period of your pension plans.
• Investment Portfolio – Yet another factor that you must carefully consider when planning your pensions or retirement is your investment portfolio. Carefully consider how much life insurance, health insurance and medical insurance do you have in hand and till what time are they going to support you and your loved ones. Basis this analysis, determine the right amount of corpus you need to build for your retirement and invest in a pension plan accordingly. 
• Present Lifestyle-If you have been living a really healthy lifestyle, then you will have less chances of contracting an age prone disease in your retirement years. Hence, you may choose to build a pension corpus at a slow and steady pace. However, if you are the one amongst thousands who are forced to lead an unhealthy lifestyle due to work pressure or otherwise, you will more chances to contract age prone diseases. Therefore, it makes sense to choose a pension plan that allows you to build a huge pension corpus in a shorter time frame.
• Spending Pattern- Last but certainly not the least, your spending pattern too influences your pension planning to a greater extent. If you have been living a financially frugal life, it makes sense to choose a pension plan that allows you to build a huge pension corpus quickly.

Conclusion

Remember, if you’re looking to retire in peace, you must have the assurance of a substantial pension amount in hand. That’s why it makes sense to be careful and heed to the above mentioned pointers while pension planning.

Refund of Service Tax in Varishtha Pension Bima Yojana

Varishtha Pension Bima Yojana is administered by LIC and is a single premium pension policy. Looking at the increasing demand in India for this policy for the enhancement of social security and welfare of senior citizens Vatishatha Pension Bima Yojana was revived by the Government. In this policy, the post-tax return is guaranteed to be 9%-9.8% p.a.

The Government has removed the Varishtha Pension Bima Yojana from the preview of Service Tax in Budget 2015 in order to make this policy more appealing. With effect from 1st April 2015, there is no service levied on the premium paid towards this scheme.

Let us learn more about the details of this scheme 

• Minimum Entry Age – LIC Varishtha Pension Bima Yojana is only available to the individuals who are 60yrs and above. However, there is no limit on the maximum age for a person to enter in this policy. This policy can be entered only by Indian citizens.

• Time limit – This scheme is open for subscription only for a small period of one year.

• Returns – Varishtha Pension Bima Yojana assures a rate of return on the policy of 9% which amounts to 9.38% return annually.

• Lock-in Period – under this policy the investments get locked in for a period of 15 years.

• The rate of Investment – In this policy, the minimum investment is fixed at Rs66, 665/- with a ceiling limit of Rs 6, 66,665/-.The ceiling limit of this policy applies to the dependents, whole family, and spouse.

• Payout Option –The policyholder can decide as to how he wants his dependents or a nominee to get paid. He can opt for monthly, quarterly or annual option depending on the need.

• The amount of Pension – In Varrishtha Pension Bima Yojana the amount of pension ranges from Rs 500/- to Rs 5000/- per month. This amount depends on the investment amount and also which pay-out option is chosen. This pension amount is paid during the lifetime of the pensioner.

• Withdrawal – In case of any unforeseen event like critical/serious illness of spouse or self or in the case of sudden death, the policy can be surrendered before 15years.The value of surrender would be given after deducting 2% as a penalty for premature withdrawal.

• Loan Facility – This policy give a benefit of a loan up to 75% of the value of the investment after 3 years of policy completion.

• Payment to the Nominee – In the case of death of the policyholder, the nominee gets the full investment amount.

• The option of Free-look period – Like any other insurance policy, this policy also offers for a Free-look period.

Service Tax Exemption in Varishta Pension Bima Yojana 

 According to the last year Budget 2015 there is a Service Tax exemption given to the policyholders on the investments made. However, people who have already invested in this plan prior to April 2015 will not enjoy this tax exemption would feel neglected as the returns which they get would be lowered because of the implication of service tax. Before service tax used to be at the rate of 3.09% on the invested amount because of which the implication is on the guaranteed rate of return gets reduced by almost 0.27%.

Drawbacks of Varishta Pension Bima Yojana 

1.   In this policy, the maximum pension amount is Rs 5000 which after the maturity of 15 years does not suffice the basic needs of the investor.

2.   The ceiling limit of this policy included the whole family because of which the maximum pension amount cannot be higher than Rs 5000.

3.   The tax-ability of the pension lowers the returns and gets the pension to 8.1% to 8.44%.

4.    Liquidity is also one of the drawbacks in this scheme as the money gets locked in for a period of 15 years with premature withdrawal charges of 2%.

In my opinion, it is wise to invest in this plan if a person who retires is not looking for higher returns and who falls in the low tax bracket of 10%.

LIC New Money Back Plan for 20 Years

A Life insurance policy provides dual benefits of security and savings. The below points explain why one must plan their finances and make an integral part of their investment tool.

•    Life is full of uncertainties, and in this scenario life, Insurance comes as a saving grace for your family.

•    It is not only a financial support in case of uncertainty but also an investment plan. It helps in meeting many future goals according to the stage in life and the priorities.

•    It protects against the rising health expenses. It offers protection against critical diseases and hospitalization costs.

•    It contract.

•    It is safe and highly recommended. The money that you invest is the primary responsibility of the stakeholders         

•    It offers protection as well as savings over a long term.

•    It also provides tax benefits for both at the time of entry and exit in most of the plans.

•    Money back policy also acts as a useful tool to cover mortgages and loans taken by the policyholders.

The NewMoney Back Plan is one such plan that provides periodical returns of survival benefits during the term of the policy. Under this scheme, 20% of the sum assured is payable by at the end of the fifth, tenth and fifteenth year of the policy term. The balance amount of 40% is due by the 20th year.

In the event of a death of the policyholder, the death claim covers the full sum assured without deducting any survival benefit amount, which was already paid. The bonus is also calculated on the full sum assured.

Features of the LIC Money Back Policy:

•    The survival benefits are paid periodically

•    There is a double tax benefit under section 80C and section 10D.

•    Death risk cover is 125 percent of the basic sum assured

•    Comes with an additional accidental sum assured

•    Loan can be availed against the plan

•    Premium payment term is 15 years only

Eligibility Criteria:

Minimum and Maximum age                                                 13 Years and 50 Years

Policy Term                                                                                 20 Years

Term of Premium Payment                                                     15 years

Maximum age of policyholder at maturity                          70 Years

Minimum sum assured                                                             100000

Maximum sum assured                                                            No maximum limit.

In Case of a possible event during the policy term:

On Survival:

5th Year       20% of the sum assured

10th Year     20% of the sum assured

15th Year     20% of the sum assured

20th Year     40% of the sum assured plus the accrued bonus.

On Death:

If the policyholder happens to die during the term of the policy her/his nominee will receive:

1.    Either 125% of the basic sum assured or 10 times of the annual premium whichever is higher

2.    Revisionary bonus

3.    Final Additional bonus if there is any.

4.    The benefits or amount that is already paid would not be deducted.

Let us understand the policy better with the help of an example:

Mrs. Basu was a 30-Year-old working woman. She invested in an LIC money back policy

20 Years of the sum assured- INR 100000

The Survival Benefits are as follows:

5th Year      INR 20000 (20% of 100000)

10th Year    INR 20000 (20% of 100000)

15th Year    INR 20000 (20% of 100000)

20th Year    INR 40000 (40% of 100000)

In case of death her nominee with receive 125% of the sum assured along with the accrued bonus. Additionally, any survival benefit that has already been paid would not be deducted.

In the case of an accidental death during the policy term the nominee with receive 125% of the sum assured+ accrued bonus+ accidental sum assured.

5 Popular Child Plans to Invest in India

                                  

If you are worried about the future of your child, it is time to shed all your worries now. In this article, we will help you understand how you can make your child’s future bright, just with a little thoughtful planning.

Sending your child to a higher education institute should be considered one of your long-term goals, besides your child’s wedding and your own retirement.  Once you make a long-term goal, it is time to start a robust financial planning.

Financial planning has been made much easier with the advent of child insurance plans. These days, almost all top insurance companies have at least one child plan among the products they offer.  Here, we will show you five most popular child insurance products available in India.

SBI Life Smart Champ Insurance Plan

This SBI child plan is a non-unit linked, participating life insurance plan. Apart from offering the guaranteed death benefit, the policy pays out the maturity benefits in instalments over a period of four years. The following table highlights the eligibility details of this child insurance plan:

Entry Age	21 years – 50 years (for proposer); 0 – 13 years (for child)
Maturity Age	70 years(for proposer) ; 21 years (for child)
Minimum Annual Premium	Rs.6,000/-
Minimum Sum Assured	Rs. 1,00,000/-
Policy Term	21 years minus child’s age at entry

The benefits offered by the plan include:

Ü  Death benefit

Ü  Maturity and Survival Benefits paid out in instalments

Ü  Vested Simple Reversionary Bonuses

Ü  Terminal bonuses(if any)

Ü  Income Tax benefits

Max Life Shiksha Life super

This is a non-participating Unit-linked child education plan. The plan lets you choose from and switch among 7 fund options so that your investment stays safe through the ups and downs of the market. Here are the eligibility criteria of the child plan as follows:

Entry Age	21 years – 50 years (for proposer); 0 – 18 years (for child)
Maturity Age	65 years(for proposer)
Minimum Annual Premium	Rs.25,000/-
Minimum Sum Assured	10 times annualized Premium

The benefits offered by the plan include:

Ü  Death benefit

Ü  Maturity Benefit

Ü  Guaranteed Loyalty Additions

Ü  Income Tax Benefits

MetLife Smart Child Plan

Another Unit Linked Insurance Product, MetLife Smart Child Plan guarantees to safeguard the future of your child from all sorts of financial adversities. This plan allows you to create wealth for future a swell. Following are the eligibility details of the plan:

Entry Age	18 years – 55 years (for proposer); 90 days  – 17 years (for child)
Minimum Annual Premium	Rs.18,000/-
Minimum Sum Assured	10 times annualized Premium
Policy Term	10, 15, 20 Years

The benefits offered by the plan include:

Ü  Death benefit

Ü  Maturity Benefit

Ü  Guaranteed Loyalty Additions

Ü  Income Tax Benefits

HDFC SL YoungStar Super premium

This is a Unit linked child insurance plan offered by HDFC Life. This is a highly customizable plan as it allows you choose the sum assured payout options and the plan option as well. The eligibility criteria of the child education plan are shown in the following table:

Entry Age	18 years – 55/65 years (for proposer)
Maturity Age	65/75 years(for proposer)
Minimum Annual Premium	Rs.24,000/-
Policy Term	10-20 years

The benefits offered by the plan include:

Ü  Death benefit

Ü  Critical Illness benefit

Ü  Maturity Benefit

Ü  Guaranteed Loyalty Additions

Ü  Income Tax Benefits

Birla Sun Life Insurance Vision Star Plan

This child plan is a whole life insurance plan that offers guaranteed life coverage for 100 years. The plan offers limited premium payment option and you can choose the date on which you will receive the pay-outs from the insurer. The table below shows the policy details of the plan:

Entry Age	1 years – 65 years
Accumulation period	5 years – 35 years
Minimum Annual Premium	Depends on the sum assured
Minimum Sum Assured	Rs. 1,00,000/-
Policy Term	100 years (whole life)

The benefits offered by the plan include:

Ü  Death benefit

Ü  Survival benefits

Ü  Maturity Benefit

Ü  Monthly Additions

Ü  5 Additional Rider Options

Ü  Income Tax Benefits

The ones discussed above are some of the most popular child insurance plans available in India. Apart from these, there are other Child Education Plans as well that are economical and offers a lot of interesting benefits at the same time. So, if you want to make your child’s higher education easily affordable for you, do your research and choose the right education plan for your child.