Pension Schemes - DSFS WEALTH LLP

Pension funds are financial tools that help you in accumulating funds for your post-retirement years. By investing a certain amount regularly towards your pension fund, you will build up a considerable sum in a phase-by-phase manner.

Accumulation stage: You pay a specific amount regularly until you retire.

Vesting stage: Once you retire, you get a steady flow of income for life.

Types of Pension funds in India

NPS

The government of India introduced the National Pension Scheme (NPS) as a financial cushion for retired persons. Some of its features are as follows:

You have to invest in this scheme until 60 years of age.

The least sum you must invest is ₹ 1000. There is no upper limit.

Your money will be invested in debt and equity funds based on your preference.

The returns depend on the performance of the funds you choose.

When you retire, you can withdraw 60% of the savings.

You must use the remaining 40% to buy an annuity – a retirement plan offering periodic income.

Public Provident Fund (PPF)

PPF is a long-term investment scheme with a 15 years' tenure. Thus, the impact of compounding is enormous, especially towards the end of the term. Every year you can invest a maximum of ₹ 1.5 lakhs in your PPF account. You can pay upfront or through twelve instalments staggered over the financial year. Your PPF investments are eligible for tax deductions* under Section 80C of the Income Tax Act (ITA). The government sets the interest rate on PPF every financial quarter, based on the profits from government securities. The funds are not market-linked.

Employee Provident Fund (EPF)

EPF is a government savings platform for salaried employees. Both your employer and you have to make equal contributions towards your EPF account. Your share is removed from your salary every month. The Employees' Provident Fund Organisation (EPFO) sets the interest rate on the investment. On retirement, you receive the total funds contributed by you and your employer along with the accrued interests.

Annuity plans with life cover

Such plans provide a life cover along with a regular source of income. If an unfortunate event occurs while the plan is active, your family member receives a lump-sum payout, however there are other options too that do not offer this financial coverage. Annuity plans are of two types:

1) Deferred annuity
It is a contract with an insurance provider helping you build a retirement corpus. You can make a single lump-sum payment or pay regular premiums over a fixed time-frame – the policy term. Thus, this scheme helps you invest as per your resources. When the policy period ends, your pension starts. If your retirement date is far in the future, this plan is suitable for you.

2) Immediate annuity
It is a contract between an individual and insurance company, where in the individual pays a lump sum amount and receives guaranteed income for lifetime, starting almost immediately. ICICI Prudential Life's Guaranteed Pension Plan is one such retirement policy that offers both Immediate and Deferred Annuity options. It offers several benefits:

A lifelong guaranteed income

Eleven annuity options, including pension for your spouse/family member or return of purchase price to your nominee in your absence

Options to avail income on a monthly, quarterly, half-yearly, or annual basis

Top-up option to systematically increase your annuity income

Attractive discounts for NPS subscribers or existing customers

Tax benefits on the premiums paid

Option for lump-sum payout on the diagnosis of critical illnesses or permanent disability is covered under the plan

Options to get back the purchase price earlier in your lifetime