Why Pension Plan is Essential for You?

2-June-2021 |

Each one of us has defined a standard of living in the course of our employment phase. We fulfil our basic needs and provide financial protection to our family members. As a moral obligation, we have to continue to do so after retirement as well. However, as there is no regular employment income, you have to focus on an annuity pension plan. It should be based on a complete understanding of the essential expenses and long-term financial commitments. Let us discuss the importance of an annuity plan in detail here.

What is an annuity pension plan?

It is a type of financial plan by which you invest a lump sum amount for regular retirement income. It is important to have a secure financial life after retirement until death. Retirement funds received after the employment phase tend to get consumed faster than expected. Hence, it is advised to invest in a pension plan as early as possible to derive maximum benefits. 


Why is a pension plan essential?


An annuity pension plan provides benefits for comfortable and peaceful living in the following ways.

  1. Daily expenses - Daily expenses and utility bills such as electricity, water, telecommunication have to be met even after retirement. These are essential commitments that you need to fulfil.

  2. Short term financial commitments - There are possibilities that you come across specific repairs of home appliances or your vehicle. You cannot delay such expenses when you are in desperate need of them. Also, there are special occasions such as festivals or a family function for which you are obliged to attend and contribute. 

  3. Medical expenses - As you start ageing, there are regular medical check-ups, medicine costs that keep recurring. Pre-existing ailments can increase and will require adequate attention that will definitely cost more. 

  4. Debt management - If you are the only earning member in your family, there is a possibility of having debts. It can be for purchasing a house, car or children education. An annuity plan can support you by managing these debts and pay them off regularly after retirement.

  5. Family obligations - Every individual will plan and complete all the financial responsibilities before retirement like children education, marriage etc. However, the responsibilities do not end there. You will be expected to provide financial support to your children and other family members when in need.


Having seen the ever-ending financial obligations in your life, you will understand the importance of annuity pension plans and their benefits in the course of your employment phase. There are different types of annuity pension plans present in India.

Annuity Plans in India



In order to help people have a secured financial lifestyle after retirement, there are many annuity pension plans in India. Let us discuss in brief the three major types here.

 

  1. Deferred annuity pension plan -

    In this plan, the investor will either invest a lump sum amount to buy an annuity or pay regular premium amounts to build a pension corpus and receive regular income from the maturity date.
     
  2. Immediate annuity plan -

    The investor will make a one-time payment and purchase an annuity to receive regular income immediately. With an immediate annuity plan, the income can be received monthly, quarterly, half-yearly or annually. 

  3. Certain annuity pension plan -

    The annuity period is fixed in this case. The regular income is provided for a set period of time. If the investor dies during the term, the nominee can receive the annuity amount.

The employers also define other pension plans for the benefit of employees in the organisation. These pension details can be reviewed by the employees anytime. Also, pension schemes are introduced by the Government of India, such as the National Pension Scheme (NPS), to build a retirement corpus in the long term. 

Of all the different pension plans, the immediate annuity plan is preferred by many sections of people. Here is a brief about this plan and why it is essential for you.


Immediate annuity pension plan


Investors can avail of the immediate annuity plan by paying a one-time premium for the whole life annuity. It is also possible to receive the annuity along with the purchase price in some specific plans. The plan also provides the flexibility to choose the mode and frequency of the regular annuity income.

Tata AIA Life Insurance offers the Tata AIA Life Insurance Smart Annuity Plan (UIN: 110N150V05). This plan offers a choice of annuity options, top-up facility to enhance the offerings, choice of a joint life annuity, option to choose whole life annuity, loan against the policy, and so much more!


Such an annuity plan is essential because, on any day, a financial practice to save money without a defined structure will not work. The retirement fund received can be spent more often if there is no planned accounting. You cannot always rely on a friend or a family member for any expenses in your retirement life. Additionally, if you are the only earning member, it is your primary responsibility to ensure financial protection to your family at different stages in life.


Conclusion


We have discussed what an annuity pension plan is and its importance in a person's life. We have seen the benefits of a pension plan in different dimensions. This would have provided insight towards the practice for saving money for the retirement corpus. There are many ways to invest in pension plans. We have seen the most prominent ones in the market. Now, it is time to take the necessary steps to plan for your retirement life by incorporating the appropriate pension plan for you! 


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Disclaimer

  • Insurance cover is available under the product.
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  • The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.
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  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
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  • Every effort is made to ensure that all information contained in this document is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.