Pension Plans in Life Insurance

Pension Plans in Life Insurance

To lead a peaceful and comfortable life after retirement, it is advisable that we plan and begin saving as early as possible. Retirement period is a long vacation where we have ample time to fulfill our desires and live life on our own terms. However, to enjoy this vacation to the fullest, we need to be financially independent. Planning wisely for retirement can help stabilize the future by regularizing income even when we stop working.

Opting for a life insurance policy which also offers retirement benefits is the best way to secure our old age. Insurance companies offer various pension plans that help save part of the income for the future.

Pension benefits in Life insurance 

  • The first and foremost benefit of buying a pension-based life insurance plan is to secure a regular income for a lifetime in order to meet the needs of loved ones when the main bread earner of the family dies.
  • Opting for a life insurance policy with pension benefits is a long-term investment. In a pension policy, a part of monthly income is to keep aside to pay asa premium, it helps to reap the benefits at a later stage in life. Starting at an early stage in life will help build a huge retirement corpus, and inculcate the habit of saving.
  • Longer the duration of investment, higher will be the returns. Planning retirement early in life will help to accumulate a higher amount during retirement. Also, buying a pension based life insurance plan at an early age in life is relatively cheaper as compared to buying a plan when one turns older. Higher the age, higher will be the premium.
  • Buying a life insurance plan linked with pension benefits should not be treated as an additional burden on finances. It should be utilized as a tool to save for the future. Buying a pension plan at the right time will provide various tax benefits, and moreover as one grows older, one may not even qualify to buy a plan.
  • The insurance market has varied life insurance pension plans available. On the basis of risk appetite, one can opt for any of these plans. Higher the risk, the higher are the chances of better returns.
  • Opting for any pension based life insurance plan undoubtedly assures a regular income after retirement, but the core benefit of life insurance policy stays intact. In case of a person’s demise, the family will get the sum assured to help secure their financial needs.
  • Last but not the least, opting for a pension plan brings peace of mind for the rest of one’s life, as one does not need to worry about the future of loved ones. In the case of uncertain death, all benefits are transferred to the nominee. In case one survives, one is in a better position for having saved enough funds to secure the future.

Eligibility for Pension Plans in Life insurance

There are a number of pension plans available, and the eligibility criteria for all these plans are more or less the same.

  • For few life insurance retirement plans, the minimum age of entry is as low as 20 years. However, some plans welcome only those individuals who are over 30. The premium will totally depend on the age and the duration of the plan. The vesting age for such policyholders will range from 55 to 65 years.
  • The maximum age again depends on the plan that one has opted for; several policies do not entertain anyone who has reached the age of retirement i.e., 58 years. Some plans allow the maximum age of 85 years. However, the vesting for such policyholders depends on the price paid for the policy and the age of the policyholder.

The maturity proceeds from the pension plans have to be utilized for any one of the following purposes:

  • To purchase an immediate annuity, from the entire policy proceeds
  • To purchase a single premium deferred pension product, from the entire policy proceeds
  • To purchase an immediate annuity with an option to commute up-to one-third of the policy proceeds, as per current Income Tax rules

There is no age limit to achieve one’s dreams. But to make those dreams come true, one needs to plan at the earliest. One should not be under the impression that one has enough time for retirement. The sooner one plans for it, the better will be the quality of life after retirement.

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