Top 5 Pension Plans In India

Most people look forward to retired life. With no pressure about work-life balance and ample time to do the things that you like, it’s the phase of rewinding and relaxing. But even though it brings a life full of peace, retirement can also be one of the most dreadful phases in one’s life.

Precisely because retirement puts an end to income. With no income, how would you have the financial liberty of living the life of your dreams? Getting a pension plan is a way to lead a post-retirement life without any financial woes. A pension plan acts as a financial net to help with the cost of living after retirement.

Now that you know what is pension, and a pension plan, here’s a list of the best retirement plans in India.
Top 5 Pension Plans in India

1. National Pension Scheme (NPS)

National Pension Scheme is a government initiative that enables employees to build a corpus that can take care of the finances of their post retirement life. National Pension Scheme works by setting up a NPS account and making regular deposits. A portion of this deposit is used to invest in equity, which is why returns are not guaranteed.

However, deposits can get 8 to 10% annualized returns. A set percentage of the fund value (deposit + annualized return) can be withdrawn upon maturity, while the rest is paid through monthly pay-outs. However, a portion of the fund can be prematurely withdrawn in case of any emergency. Anyone working in the private or public sector can invest in this pension plan.

2. Atal Pension Yojana (APY)

Atal Pension Yojana is a retirement plan in India formulated specially for the unorganized sector in India. The Atal Pension Yojana involves regular contributions for a minimum of 20 years. The minimum investment amount varies according to the age. A person can start investing for an amount as low as INR 50.

That said, Atal Pension Yojana is a pension plan that also involves shared contribution to encourage the unorganized sector to start their pension fund. Under the scheme, the Government of India can contribute INR 1000, or 50%, whichever is lower; the rest has to be contributed by the scheme holder. The scheme was named after former prime minister of India Atal Bihari Vajpayee.

3. Indira Gandhi National Old Age Pension Scheme (IGNOAPS)

Also known as National Social Assistance Program (NSAP), Indira Gandhi National Old Age Pension Scheme, was launched in 2007 by Ministry of Rural Development of India with an objective of making the elderly financially independent in their post retirement life. This retirement plan in India works by providing the subscriber’s monthly pension. Anyone who is above 60 years, and falls low-income category, can participate in the pension scheme.

5. Employee Pension Scheme (EPS)

Employee Pension Scheme, also known as EPF, is a pension plan aiming to provide post-retirement financial protection to salaried individuals. Under EPS, the contribution is shared between the employer and the employee. In other words, both the employee and employer contribute to the fund under this pension plan. Employees who have a salaried income of more than INR 15,000 per month can participate in this scheme.

One can withdraw the full fund on retirement. However, one can also withdraw 90% of the amount if they’re over 54 years of age. Additionally, 75% of the amount can be withdrawn in case of unemployment that exceeds a month.

Whether it is to provide for household expenses or medical emergencies, financial preparedness is integral for a retirement life. Depending on life savings can help but investing in these retirement plans in India can go a long way towards providing you extra financial net for your retirement life. Additionally, these schemes can also allow tax savings. You can use Income Tax Department’s tool to calculate your tax deductions.