9 Tips for Choosing a Pension Plan

India’s retail inflation climbed above 6% in January 2022¹. In all likelihood, expenses will continue to rise in the future. Choose a pension plan where the value of your investment increases in line with inflation.

You can also diversify your investment with a retirement pension plan. For instance, you can invest in a regular retirement plan that invests in debt instruments, or go with a Pension ULIP that offers a mix of equity and debt investments or invest in National Pension Scheme

With a deferred annuity plan, you pay regular premiums and start receiving annuities after completing the payment term. In immediate annuity plans, you invest a lump sum amount and start receiving annuity immediately. You can choose the option that works for you, depending on your age.

Would you like to receive your pension on a monthly or annual basis? Pick a plan that offers flexibility with a variety of annuity payout options, including monthly, quarterly, half-yearly and yearly. Some plans also allow you to increase the pension payout with age.

The primary goal of investing in a pension policy is to receive a steady income after retirement. Some plans only pay the annuity for a fixed duration – but it’s better to invest in a plan that offers guaranteed income for life.

Some pension plans offer joint-life options, whereby the policy provider continues to pay pension to the policyholders' spouse/parent/child/sibling even after their sudden demise. Consider this option if you have people dependent on you.

The average retirement age in India is 60 years³. However, if you’d like to retire sooner or later than that, you can choose the ‘vesting age’ of your pension plan. This is the age after which you’ll start receiving annuity payments. In most plans, the minimum vesting age is 45 years and the maximum age is 70 years.

The accumulation phase is the period during which you pay premiums to the policy provider. The payment period is the total duration for which you’ll receive the annuity. Check both the parameters before investing in a pension plan.

The best pension schemes also come with built-in benefits such as death benefit, critical illness rider, accidental death rider and more. You can also find plans that offer additional bonuses, such as a loyalty bonus, to help you boost your retirement savings.