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Pros And Cons Of Investing In A Pension Plan

Updated On Feb 03, 2022

People in India are highly concerned about living after retirement, hence retirement plans or pension plans are by far the most sought after insurance. And it's self-evident that pension plans offer a slew of advantages and benefits, and that they're popular with the general public for a reason. However, many people prefer to invest in other ways as well. This is due to the fact that there are several disadvantages. Let us discuss the advantages and disadvantages of pension plans in India.

When you have a huge number of enterprise options to choose from, your judgments should be calculated and sensible. Retirement planning is an essential component of your overall financial plan. You just cannot afford the risk of running out of money during your retirement years. As a result, in addition to your typical reserve savings, you should draw up a retirement plan that really can support your regular expenses in this period while still leaving some money to pursue your diversions. To know and understand more about the pros and cons of investing in pension plans, read on.

Pros And Cons Of Investing In A Pension Plan

What Are The Pros And Cons Of Investing In Pension Plans?

To make the greatest investment decision, you must first understand the overall benefits and drawbacks of various retirement investment options. Retirement/annuity plans may be a smart investment for you and should be a part of your retirement planning. However, take a look at the benefits and drawbacks listed below to see if this investment tool is right for you.

Following are the listed pros of investing in a pension plan -

1. Freedom to improve throughout resource classes - most benefits funds provide investors the option of selecting the resource class in which they desire the maximum transparency. As a financial backer, you have the option of choosing between pure obligation, pure value, or a mix of the two.

2. Long-term contributing benefits - since those plans contribute for as long as feasible, your speculations may reap the benefits of long-term donating. Benefits programmes ensure that you have a sizable corpus when you leave and purchase an annuity, which can provide a steady stream of income once you retire.

3. Various payment options - Benefits plots often give financial backers a lot more flexibility in terms of how they want to make their payments. Financial supporters can choose to donate a lump sum and get immediate annuity payments, or they can choose a deferred annuity plan, which allows their funds to earn more interest until distributions begin.

4. Can provide the benefits of a life insurance policy - certain annuity plans also provide a daily life insurance policy, in which a lump sum payment is made to a relative or chosen person upon the protected death.

5. Access to a single sum of money during a crisis - financial backers are allowed to make some adjustments to their benefits strategy and access assets in the event of a catastrophe. These calamities have been predicted.

Following are the listed cons of investing in a pension plan -

1. Duty derivation with restrictions - While interest in a benefits plan can be deducted as an expense under section 80C of the Income Tax Act, 1961, the maximum admissible allowed is Rs 1,50,000.

2. Tax collection on annuities - annuities received after retirement are in the ownership of the recipient.

3. Most suitable for early financial backers - in order to enjoy the full benefits of a benefits plot, the financial supporter must begin contributing to the plan as soon as possible.


Retirement plans, often known as pension plans, are one of the most prevalent types of investments made by individuals. Even once the continuous flow of cash ends, they live a stress-free existence. One must carefully weigh the benefits and drawbacks of the pension plan into which they are investing.

Do read - Types Of Retirement Plans

Some Questions You Need To Ask Before Purchasing A Pension Plan

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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