Buying a pension plan is advisable for long-term goal of old age income security. These plans provide regular payouts after your salary cheque ceases on retirment. If you are buying it early in your working life, you will have the benefit of paying lower premium and a longer accumlation period means your corpus at the time of retirement is likley to be substantially higher than if you chose to invest later in life.
However, if you are in your early stages of working life, maybe in your 30s, you might be unsure on whether to buy a pension plan, and if so what should be the factors that should determine your choice of plan.
Alok Bhatnagar, co-founder and CEO, Easypolicy.com, says a young person buying a pension plan should look for plans with higher equity to get better returns over the long run. “High returns should be the most important priority since the customers are very young and have enough time to let their money grow; for this they should be more equity exposed,”
He says that other considerations should be the type of annuity options he or she wants to avail at the time of vesting age which is the age at which once decides to retire. Pension payout will start at that age.
Bhatnagar says the other main factor to take into consideration is the tax benefit available with the investment.
Under pension plan, both 80 C and Sec10(10)A can be availed (under section 10(10)A, one third of the entire pension corpus as a maturity proceed comes tax free).
Naval Goel, founder and CEO, PolicyX.com, says along with tax benefits says one should consider the benefits of having the money invested for the long term. “Go through tax advantages that you will get and compounding interest as well,” he says.
Goel also says the buyer must do your own homework. “If you are thinking to buy a pension plan at an early age then you must plan properly for it. It is advisable to buy it from a trustworthy source, evaluate your needs and then go for it. Do some research and select the right form of pension plan that can easily go well with your needs. If there is any scheme of employer’s contribution at your workplace, then you must also look for the same,” he said.