Pension Plan

Retirement planning through a pension scheme guarantees regular income to the policy owner in the form of annuity or pension.

Types of Annuities or Pension Plans:

Life Annuity: It ensures a stipulated regular income to an individual throughout his life. The premium payment options in such a policy are either regular annual premiums or a single lump sum premium.

Factors to be considered while investing in a Pension Plan:

Comparatively, investing in a ULIP pension plan provides higher returns (if the investment in ULIP is well diversified).

Check for tax benefit provisions in the Pension Plan. Premium payments towards a Pension plan are eligible for rebate under Section 80CCC.

It is a defined contribution based pension plan.

Types of Registered Pension Plan

1. Define contribution plan 

Define contribution plan is the registered pension plan of the employee contributing by both employee himself or herself and employer base on a certain percentage of the employee income. Most registered pension plan sold today are directed money purchase plans.

2. Define benefit plan 

Most plans require at least for a 5% contribution by employer and employee. 

Employee contribution 

The pension is known well before retirement. Employer contribution to employee registered pension plan depends on seniority of each employee resulting in less contributing for younger employees.