Retirement plans are designed to provide financial security and a steady income after you stop working. In India, various retirement or pension plans cater to different needs, risk appetites, and income levels. Here are the main types and features:
- National Pension Scheme (NPS): A government-backed, voluntary, market-linked retirement savings plan. It allows investment in equity, government bonds, and corporate bonds. Upon retirement (usually at 60 years), you can withdraw up to 60% of your accumulated corpus; the remaining 40% must be used to purchase an annuity that pays a regular pension. NPS offers flexibility in investment and tax benefits.
- Atal Pension Yojana (APY): Targeted at low-income and unorganized sector workers aged 18-40. It guarantees a fixed monthly pension from Rs. 1,000 to Rs. 5,000 after 60 years based on contributions. It includes government co-contribution for eligible subscribers and provides financial security for workers without other pension schemes.
- Public Provident Fund (PPF): A popular long-term savings scheme with a 15-year maturity period, extendable in blocks of 5 years. It offers fixed, tax-free returns with investment limits and tax benefits under Section 80C. Though not a formal pension, the corpus accumulated can be utilized post-retirement or to buy annuity plans.
- Employee Provident Fund (EPF): Mandatory for salaried employees, both employer and employee contribute a portion of salary regularly. It accumulates with interest and is payable upon retirement or job change, offering a guaranteed return.
- Annuity Plans: These plans provide a guaranteed regular income post-retirement in exchange for lump sum investment. Immediate annuity starts payments soon after investment; deferred annuity starts payouts after a specified deferment period. They offer predictable income for life or a specific term.
- Other Pension Funds: Managed by financial institutions or mutual fund companies, these invest in diversified portfolios aiming for growth and income, suited for those seeking market-linked returns with professional management.
In essence, retirement plans in India combine government-backed security with market-linked growth options, designed to help build a corpus during working years and ensure stable income after retirement, thus securing a financially independent retired life.