Consider before taking the decision
Traditional Pension Plans and ULPP
While the traditional endowment plans give guaranteed returns and bonuses if applicable, ULPP or unit linked pension plans bear the market risks. Returns are subject to funds chosen and the market conditions. (If the market is doing well, the returns may be better that traditional plans but if the market is not doing too well, returns may not be too good either).
- Immediate Annuity plans and Deferred Annuity plans
Immediate annuity plans, commence within one year of having paid the premium, generally a single premium. Deferred annuity commencesafter the accumulation phase or the deferment phase is over. The premium paid can be regular or single. While immediate annuity plans are more suited for those who have retired and wish to invest the retirement benefits for pension, deferred annuity plans are ideal if you are doing the retirement planning.
- With Death Benefit and Without Death Benefit Plans
While most traditional plans offer death benefit as a part of the pension plans, in ULPPs you have the option where you can choose to avail death benefit or not. If you opt for a plan with death benefit, your nominee will get the sum assured while if you opt for pension plan without cover, the nominee or the beneficiary will get the corpus built till date.
- Choice of Vesting Date
Vesting date is the time when you decide to end the accumulation phase and begin the income phase. It is largely based on your age and chosen date of retirement.For traditional plans, based on a given age criteria, it is a fixed duration. In case of ULPPs you can choose your vesting date within the permissible minimum and maximum duration.
- Types of pensions
There are 4 basic options to avail the annuity
- i. Lifetime annuity without return of purchase price
- ii. Annuity for life with return of the purchase price after the death of insured
- iii. Lifetime annuity, guaranteed for a certain number of years and
- iv. Joint life/ Last survivor annuity for self and spouse. Weigh the utility and benefits of each type before availing the option.
- Vesting Options
In most pension plans you have two vesting options
- i. Purchase annuities with the 2/3rd of the corpus generated and withdraw the balance 1/3rd amount and
- ii. Purchase annuities with the total corpus generated over the time. Further you also have the choice to buy annuities from the company you invested in or buy from the annuity provider of your choice. These are the decisions that one needs to take based on individual financial condition at the vesting date and returns offered by various companies.