Retirement Plans in India for NRIs

What is a Retirement Plan?

Retirement or pension plans are a type of investment vehicle that allows you to accumulate a portion of your savings over the long term so that you can appropriately use those funds post your retirement.

These plans are designed to help you effectively deal with the financial uncertainties arising after retirement and make sure that you can enjoy a steady flow of income.

When investing in a retirement plan in India, you have to contribute a certain sum of money regularly until you get retired. This money shall be given back to you in the form of annuity or pension in the future and serve as a much-needed financial cushion.

Why Do We Need a Retirement Plan?

Pension plans in India offer a reasonable and secure investment option for NRIs in Canada. One can have the assurance of acquiring regular income after their retirement when you do not have any monthly salary to depend on.

The retirement period is often called the golden years when you would have enough time to relax and enjoy. However, this can only be possible if you have adequate funds.

Retirement plans make sure that you don't have to depend on anyone else during the second innings of your life.

Types of Retirement Plans

The retirement plans available as investment options are regular pension plans and annuity plans. While both offer regular payouts, the annuity amount can be availed on a yearly, half-yearly, quarterly and monthly basis.

To effectively cater to all individuals' distinguished requirements and financial goals, a plethora of retirement plans are available in the country.

Here are some of the most popular types of retirement plans India you can invest in:

Deferred Annuity

Such a plan would enable you to accumulate a lump sum with the help of either a single premium or regular premium payment over a policy term.

After the completion of the plan tenure, the pension plan provides distinguished benefits to the insured individual. By investing in a deferred annuity scheme, you shall also get the option of enjoying a certain sum of tax exemption.

Under this plan, 2/3 of the corpus is taxable, while 1/3rd of it is free of taxes. The sum of money invested in such a plan is locked in and can't be withdrawn before tenure completion under any circumstance.

Immediate Annuity

The pension sum is provided on an immediate basis under this scheme. You shall have to pay lump sum money, and based on it.

You shall acquire the pension amount instantly. There are a variety of annuity options available under this scheme, from which you can make your choice.

The premiums paid for the immediate annuity scheme shall be exempted from taxes in India under the Income Tax Act, 1961. As per this plan, your nominee shall receive the relevant sum of money in case of your unfortunate demise during the policy period.

Pension Plans With Cover

This retirement plan India includes the aspect of live coverage. After the death of the policyholder, lump sum money shall be paid to their beneficiary.

The coverage is generally low as a large portion is paid towards increasing the corpus sum rather than providing coverage for life risks. As of now, deferred pension schemes tend to come with the option of life coverage.

Pension Plans Without Cover

Under such a plan, there is no kind of life coverage provided to the insured individual. However, upon the death of the policyholder, their nominee would get the policy amount remaining.

Annuity Certain

The annuity amount is paid to the annuitant for a certain number of years, as per this pension plan option. The annuitant might select the term as per their will. In case they meet an untimely death before receiving the complete payment, then the annuity shall be paid to the relevant policy beneficiary.

Guaranteed Period Annuity

The guaranteed period annuity is offered to the policyholder for certain periods, like 20, 15, 10 or 5 years. It is also amongst the popular retirement plans in India.

Life Annuity

As per this annuity policy, the pension sum shall be paid to the annuitant till their death. In case of the death of the policyholder, the amount of pension shall be given to their spouse.

It shall be noted that the option ‘with spouse’ must be selected while buying the policy.

National Pension Scheme (NPS)

A major retirement plan India, the NPS was introduced by the government to effectively secure the financial future of people after their retirement.

Individuals can put their savings in this scheme, as per their preference. This money is invested in debt and equity funds to generate ROI.

The policyholders also get the option of withdrawing 60% of the sum at retirement. The remaining 40% of the amount tends to be used to buy an annuity. The proceeds from its maturity, however, are not free from taxation.

Pension Funds

The PFRDA or Pension Fund Regulatory and Development Authority has allowed six companies to serve as fun managers and manage the pension funds. These companies provide pension funds with the capacity to pull back your annuity sum at the hour of the aggregation stage.

Such features of pension funds guarantee their security upon which policyholders can rely to grow corpus.

Whole Life ULIPs

As per this pension plan option, the investor's money is kept invested for the whole life of the policyholder.

Upon retirement, one can make a partial withdrawal from these funds, as well and enjoy an income that is free of taxation. Added withdrawals are applicable when the need arises.

Defined Benefit

By investing in such a retirement plan India, you can enjoy income for life by paying a certain sum of money for a particular span. The sum of money to be paid as a pension amount is formulated by considering monthly earnings.

Under the defined benefit plans, not only you but even your employer can also contribute. Your employer shall ideally be responsible for guaranteeing that there is adequate cash to pay for the prospective benefits of all the members within the policy.

Defined Contribution

In such a plan, the contributions to the fund are guaranteed, but the income on retirement is not. In the defined contribution plan, both the policyholder and their employers can make contributions.

The sum of money accessible for your retirement shall heavily rely on the all-out contributions made to your record and ROI. Upon retirement, you would have to make use of the cash in your record to generate retirement remuneration.

Minimum Guarantee of Retirement Plan

All retirement plans in the country tend to have a minimum guarantee. It means that each premium amount paid towards the insurance and maturity benefit has an 'on zero return,' as per IRDAI.

This minimum guarantee additionally must not be lesser than 1% of the premiums paid by the policyholder throughout the years.

Even though the minimum guarantee is applicable on all variable insurance policies, most of the companies offer retirement plans India that provide superior returns to other types of guaranteed plans.