Best Single Premium Pension Plan in India

Planning for retirement is a vital aspect of financial management, ensuring you have a steady income when you decide to stop working. One way to do this is by investing in single premium pension plans.

Rather than having to pay premiums repeatedly during the policy years, here, you invest a lump sum amount and enjoy a regular income during retirement years!

Such plans are aimed at providing peace of mind without creating a burden of frequent premiums. And if you have a question  – 

"Which single premium pension plan is likely to suit me the best?" 

– You're in the right place!

In this blog, we will discuss the best single premium pension plans in India and assist you in selecting the most appropriate one.

What is a Single Premium Pension Plan?

A single premium pension plan is a type of retirement plan where you make a one-time lump sum payment to the insurer instead of paying in installments over the years. 

The investment grows over time, and the insured will be provided a fixed amount of money for a certain period, usually for the remaining lifetime. 

Here's the lowdown:

• Single Premium: This refers to a single premium that is paid once at the beginning of the insurance policy.
• Annuity Payments: Under this policy, payments are made to the policyholder periodically either right away (immediate annuity) or after some time has lapsed (deferred annuity).
• Investment Growth: This is where the insurance company invests the premium in different markets and uses the proceeds to pay the annuities due.
• Income for Life: Once a policyholder begins receiving annuities, they continue until the death of the policyholder.

Key Benefits of a Single Premium Pension Plan

Choosing a single premium pension plan has its benefits. Here are some key benefits to consider —

• Financial Flexibility:  Regular premium payments can stretch your finances. Single premium plans take away this disadvantage since only one payment is made, therefore enabling you to better watch over your budget.
• No Lapse Risk: With a single premium plan, you do not have to worry about a policy ever lapsing due to failure to pay the premiums since there are none.
• Effective Use of Windfall Gains: With these plans, the elderly have a great opportunity to invest their gains into something good. 
• Added Life Cover: These plans also offer lifetime cover for the beneficiary in addition to providing regular income. If the policyholder passes away, their spouse or dependents will receive a lifetime pension. 

Types of Pension Plans - Single Premium 

Here are the major types of single premium plans that you should know of –

Types of Single Premium Plans	Description
Traditional Single-Premium Plans	Reliable investment option with consistent returns throughout the investment period.
Immediate Annuity Plans	Provide immediate income to the policyholder after a lump sum payment, usually starting within one month.
Deferred Annuity Plans	Income payments start at a later date, allowing the accumulation of a larger sum for retirement.
Unit-Linked Pension Plan	Combines pension features with investment opportunities. Premiums are invested in equity, debt, or hybrid funds, offering returns based on fund performance.
Guaranteed Single Premium Pension Plans	Offer a guaranteed income for a fixed period or for the lifetime of the policyholder. Income payments are predetermined.
Life Annuity with Return of Purchase Price	Provides the policyholder with a lifetime pension, and upon their demise, the purchase price of the annuity is given to the nominee, ensuring the initial investment is passed on.
Joint Life Annuity Plans	Offers pension for both the policyholder and their spouse. After the policyholder’s demise, the spouse continues to receive the pension, providing lifetime financial security for both partners.

Which is The Best Single Premium Pension Plan in India?

Here is a detailed list of the best single premium pension plans in India —

1. SBI Life – Saral Pension

SBI Life's Saral Pension Plan provides financial safety for the elderly with an Immediate Annuity option. The applicant can select either a Single Life or Joint Life Annuity return of premium option, as per their needs.

Key Features:

• Loan Facility: Requests for the loan can be made six months after the commencement date of the policy. The maximum allowable loan will be based on the interest but can't exceed 50% of the annual annuity.  
• Tax Benefits: The SBI Life Saral Pension Plan allows you to receive tax benefits as per the provisions of Indian tax laws.
• Free Look Period: You may review the policy, and if it doesn't fit your needs, you can cancel it within 15-30 days from the date of policy acceptance. 
• No Maturity Benefit: This plan is not endowed with any maturity benefit.
• Death Benefit: Annuity payments stop after the death of the policyholder. However, the complete purchase price is refunded to the nominee. 
• Life Annuity with Return of Purchase Price: Lifetime guaranteed annuity payments with 100% return of the purchase price to nominees upon death. 
• Joint Life Annuity: Offers annuity payments to the widow or widower upon the death of the primary annuitant and returns the purchase price at the death of the last survivor.

2. HDFC Life Click 2 Retire

HDFC Life Click 2 Retire is a unit-linked, non-participating single premium insurance policy designed to help you create a safe retirement. The plan allows for the flexibility to choose the premium payment and policy durations, which makes it ideal in the long run for retirement planning.

Key Features:

• Flexible Policy Term: Choose between 10, 15, and 35 years.
• Premiums: The minimum premium is 50,000 rupees, while the maximum is unlimited.
• Fund Options: Three fund investment options are offered by this ULIP plan, i.e., Pension Equity Plus Fund, Pension Income Fund, and Pension Conservative Fund. 
• Assured Vesting/Maturity Benefit: Upon maturity, the higher of the Unit Fund Value or {101% + 1% * (Policy Term – Premium Paying Term)} * Total Premium paid till date is provided, and the policy will be ceased. 

However, policyholders also have the option to commute up to 60% of the vesting benefit and purchase an immediate or deferred annuity from the rest.

• Death Benefit: In case of death within the deferment period, the nominee is paid the greater of 105% of all premiums paid or the values of the unit fund.
• Options for Death Benefit: The beneficiary will receive the total sum or can use it to purchase either an immediate or a postponement annuity. 50% of the sum can be used to buy a policy from another insurer.

3. Tata AIA Life Insurance Smart Annuity Plan

Tata AIA Life Insurance Smart Annuity Plan is a non-linked, non-participating individual annuity plan that aims to provide the insured with financial independence at an elderly age.

Key Features:

• Immediate Life Annuity Option:
• Single Life: An annuity is provided until the death of the annuitant. No annuity will be paid out after the death of the annuitants.
• Joint Life: An annuity is payable during the lifetime of both annuitants. And shall cease after both annuitants die.
• No Death, Maturity, or Surrender Benefit: Under this option, there are no benefits payable on account of death, maturity or surrender.

• Immediate Life Annuity with Return of Purchase Price Option:
• Single Life: This annuity is paid until the death of the annuitant or surrendering of the policy.
• Joint Life: This annuity is paid until the death of two annuitants or surrendering of the policy.
• Death Benefit: In the event of death, 100% of the purchase price (all top-up amounts included) is payable to the nominee.
• Surrender Benefit: Available as per policy provisions, a lump sum surrender benefit is paid out.
• No Maturity Benefit: There are no maturity benefits provided under this option.

• Deferred Life Annuity with Return of Purchase Price Option:
• Single Life: This annuity begins after the deferment period and shall be payable until the annuitant's death or until the policy is surrendered.
• Joint Life: This annuity begins after the deferment period and continues as long as either annuitant is alive, ceasing on the death of both annuitants or until the policy is surrendered.
• Guaranteed Additions: These are accrued at the end of each month during the deferment period and form part of the death benefit.
• Death Benefit Option I: Higher of total premiums paid (plus guaranteed additions and top-ups) or 110% of the premiums paid.
• Death Benefit Option II: Higher of total premiums paid or 105% of paid premiums with 0.5% each month accrued at the end of every completed month 

• Payment of Annuity:
• Monthly, quarterly, half-yearly, or yearly payment options are available.

• Loan Facility (Deferred Life Annuity Option): You may request a loan during the deferment period, depending on the surrender value. The loan should not exceed 80% of the surrender value, and the policy has to be assigned to Tata AIA. 
• Free Look Period: There is a free look period of 30 days where you can examine the policy and return it if you are not pleased. You will get a refund on the amount paid except for expenses that may apply, such as stamp duty or taxes.

4. Bajaj Allianz Life Saral Pension

This is an individual immediate annuity plan offered by Bajaj Allianz Life Insurance with the purpose of offering financial independence post-retirement. To put it simply, this pension plan guarantees a regular income for the lifetime of the policyholder. On death, the Purchase price will be given to the nominee. 

Key Features:

• Guaranteed Regular Income: Annuity is received for the lifetime of the insured, which helps prevent any financial distress for the retiree.
• Flexible Payout Options: Receive annuity payments starting as early as the next month under the monthly options or after three months, six months or twelve months for quarterly, half-yearly and yearly options, respectfully.
• Joint Life Option: Offers regular annuity income to the policyholder and his/her spouse during the life of both, and the purchase price will be paid back to the nominee upon the death of both.
• Loan Availability: The loan can be taken after 6 months of policy commencement, and 50% of the annual annuity amount is the maximum interest rate chargeable on the loan. 
• Liquidity:  It is possible to access funds from the policy by surrendering it in the event of a critical illness diagnosis for which 95% of the purchase price is returned (after applicable deduction).
• Surrender Value: The policy can be surrendered after 6 months if the insured is diagnosed with a listed critical illness. The surrender value is 95% of the purchase price, subject to any loan and interest deductions. 

5. ICICI Pru Saral Pension

ICICI Pru Saral Pension allows freedom from dependence on any other sources of income after retirement. This plan offers guaranteed regular income for the whole life, devoid of dependency on market levels or company profit levels. (5)

Key Features:

• Guaranteed Lifelong Annuity*: Once you pay a one-time lump sum amount, the plan will offer a guaranteed income for a lifetime at regular intervals.
• Flexible Annuity Options: You can have the disbursal of your annuity benefits at monthly, quarterly, half-yearly, or yearly intervals, according to your preferences.
• Single or Joint Life Option: The plan can be availed as a single life plan or a joint life plan.
• Return of Purchase Price (ROP) on Death: Provision of returning the purchase price to the beneficiary in the event of the death of the policyholder.
• High Purchase Price Benefit: Additional annuity is given for high purchase price categories.
• Loan Facility: After six months of the policy commencement period, loans may be borrowed against the policy.

When is the Right Time to Invest in a Single Premium Pension Plan?

Investing as early as possible in a single premium pension plan helps grow the investment amount considerably. The reason for this is the concept of compound interest, which enables your money to grow over time. The earlier you start, the greater the advantage you have.

Let's understand this with an example: 

Suppose Vijay, age 30, invests ₹5,00,000 in a single premium pension plan at age 35. This plan offers a deferred annuity option with a deferment period of 25 years (until he turns 60).

The investment has 25 years to grow. Assuming an average annual return of 6%, At age 60, Vijay’s investment will have grown to approximately ₹21 lakhs. 

This is a perfect example showing the importance of investing early - allowing time for your capital to mature and safeguarding your financial interests for the future. 

Top Considerations When Choosing a Single Premium Pension Plan

When it comes to choosing a single premium pension plan, there are some key considerations –

• Check Your Budget:  Make sure that the one-time investment won't be a financial burden to you.
• Payout Frequency and Options:  Decide if you require monthly, quarterly or yearly payout depending on your requirements. 
• Understand Tax Implications:  Take note of tax advantages or obligations that the pension scheme may incur.
• Assess Potential Returns:  Check for the possible returns, especially if the scheme has a premium return.
• Additional Benefits:  Identify add-on riders, such as those with critical illness or life insurance coverage.
• Surrender and Withdrawal Terms: Look at the terms of the policy regarding early withdrawal or surrender of the policy.
• Insurer's Reputation: Carry out a background check on the insurer and the claim settlement ratio (CSR) for a stress-free claim settlement experience.

Conclusion

Finding the right single premium pension plan can help you feel relaxed and above worldly concerns – during retirement. With just one lump-sum investment, a steady income is fixed for your retirement life. 

To avoid the mess that could arise from wrong choices in the future, it is always advisable to talk to an insurance professional who can give you the right advice based on your unique needs.

Frequently Asked Questions

Ques 1. What are the advantages of a Single Premium Pension Plan?

Ans. The primary advantages are lifelong income, assurance of no policy lapse, financial convenience, tax advantages, and additional life insurance for your beneficiaries.

Ques 2. What are the different Single Premium Pension Plans available?

Ans. There are Traditional Plans (Immediate Annuity Plans, Deferred Annuity Plans), Unit Linked Plans, and Guaranteed Income Plans which provide different investment and payout options.

Ques 3. What are the top Single Premium Pension Plans available in India?

Ans. Some of the common ones are SBI Life Saral Pension, HDFC Life Click 2 Retire, and Tata AIA Life Smart Annuity Plan, all of which have different features such as tax advantages, loan facilities, and return of purchase price.

Ques 4. Does a Single Premium Pension Plan have any tax advantages?

Ans. Yes, in most cases, the plans provide some tax advantages under the Income Tax Act.

Ques 5. Is there a facility for taking a loan against a Single Premium Pension Plan?

Ans. Yes, some plans such as SBI Life Saral Pension and Tata AIA Life Smart Annuity Plan provide the loan facility after a fixed duration, normally of six months.