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Pros And Cons of Pension Plans in India

Updated On Sep 23, 2021

Retirement Plans or Pension Plans are the most sought after policies in India as people are very concerned about life after retirement. And it is pretty obvious that pension plans come with a plethora of advantages and benefits and are popular amongst the public for a reason. But a lot of people tend to choose other investment options as well. This is because there are a lot of cons as well. Let us talk about the pros and cons of pension plans in India here.

When there are a large group of venture choices available to you, the decisions that you make should be estimated and reasonable. Retirement arranging is a significant part of your by and large monetary arrangement. You just can't bear the cost of the danger of running out of cash in your retirement years. Subsequently, notwithstanding your normal reserve funds, you should explicitly chalk out a retirement plan that can cover your customary costs in this stage and furthermore give some extra to seek after your diversions. 

Pros And Cons of Pension Plans in India

To settle on the best venture choice you should comprehend the overall upsides and downsides of different retirement speculation instruments. Retirement/annuity plans can be a wise venture for yourself and should shape a piece of your retirement arranging. Nonetheless, do go through the beneath upsides and downsides to comprehend if this speculation apparatus is intended for you. 

Merits of Pension Plans

1. Freedom to enhance across resource classes – most benefits finances give financial backers an alternative to pick the resource class to which they might want greatest openness. As a financial backer you can pick among unadulterated obligation, unadulterated value or a blend of obligation and value. 

2. Advantages of long haul contributing - since these plans contribute as long as possible, your speculations can receive the rewards of long haul contributing. Benefits plans guarantee that a decent corpus is amassed when you resign and make an annuity which can give a consistent progression of money post your retirement. 

3. Numerous choices for installment – benefits plots normally offer financial backers a lot of adaptability as far as how they need to make the installments. Financial backers can decide to contribute a single amount sum and get quick annuity installments or they can pick a conceded annuity plan which will allow their corpus to acquire more interest until the payouts start. 

4. Can give the advantages of a life coverage cover – certain annuity plans offer a daily existence cover too in which a single amount sum is paid to the relative/chosen one at the passing of the protected. 

5. Admittance to a singular amount sum during a crisis – financial backers are permitted to make certain acclimations to their benefits strategy and access assets if there should be an occurrence of a crisis. These crises are pre-characterized. 

Demerits of Pension Plans

1. Restricted duty derivation – while interests in a benefits plan are accessible as an expense derivation under segment 80C of the Income Tax Act, 1961, the most extreme passable allowance is Rs 1,50,000. 

2. Tax collection on the annuity – annuity got post retirement, is available in the possession of the beneficiary. 

3. Most appropriate for early financial backers – to receive the full rewards of a benefits plot, it is basic that the financial backer begins adding to the plan as ahead of schedule as could really be expected.

Take Away

Retirement plans also known as pension plans are one of the most traditional ways of investment which people commonly invest into. They enjoy a tension free life even after the steady flow of income stops. One must properly analyse both the pros and cons of the pension plan they are investing into. 

Also read - Reason That Make Retirement Planning A Must For Everyone

What Is The Role Of Annuity In Retirement Planning?

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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