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Better healthcare facilities have led to an increase in lifespans, which in turn has made retirement planning essential. In the absence of social security in India, it is important to deploy your retirement funds wisely for creating a regular flow of income. A pension plan is one of the ways to earn regular income even after retirement. These plans are suitable for individuals who are closer to retirement age or have retired, as they act as a safeguard against market volatilities and falling interest rates.

HDFC Life has launched a standard pension scheme called Saral Pension Plan, which immediately pays pension at a life-long guaranteed rate right at the time of purchase. The pension will be lifelong and there is no maximum limit on the amount one can invest. It is a non-linked, non-participating, single premium plan and those who are between 40 years to 80 years can opt for this plan. It offers a flexible option for receiving annuity – monthly, quarterly, half-yearly and annually.

Key Features

-Single premium payment plan

-Lifelong guaranteed income

-No medical examination

-Surrender option in case of critical illnesses

-Return of purchase price on death

-Higher annuity rates for large purchase price

-Policy loan

Annuity options

The plan offers two options- Lifetime pension with the return of purchase price (premium paid initially) and joint-life with the return of premium on the death of the last survivor.

Return of purchase price

Saral pension plans are standard plans, with the same features across the insurers. Under option 1 of these plans, the purchaser will get lifelong annuities. On the death, the nominee or legal heirs will be paid the full purchase price.

Under option 2, the annuity will be payable until at least one of the two annuitants is alive. On the death of the primary annuitant, the secondary annuitant will receive 100% of the original annuity throughout life. Subsequently, on the death of the spouse, the premium paid is returned to a nominee or legal heirs.

Annuity Rates

If a 60-year old male invests Rs 5 lakh in the plan, he will get a monthly pension of Rs2,210. Similarly, in the case of a joint life for a 60-year old male and 55-year female, the monthly annuity works out to Rs2,174.

Comparison

If an individual invests Rs 10 lakh in LIC Saral Pension Plan he or she will earn Rs 4,304 per month. In the case of joint life, the monthly pension works out to Rs 4262. Experts say generally a person needs to invest Rs 11 lakh one time to earn Rs5000 monthly pension under immediate pension and for a 10,000 monthly pension, the one-time amount to pay is Rs21.50 lakh. The average IRR (net yield) of these plans is 5.10%.

Loan

The loan can be taken against the policy after 6 months of buying the plan.

Taxability

Last but not least, pension is a taxable amount and will be chargeable as per your income tax slab.