Best Pension Plans in India – Disadvantages and Advantages

1. Retirement Pension Plan

2. Best Pension Plans in India – Disadvantages and Advantages

3. What are the Pension Plans? • What are pension plans and how do you identify the best pension plan in India? Is it the LIC pension plans or some pension plan policies from pvt companies or some unit linked plan from companies claiming to provide you with Rs. ‘X’ for ‘Y’ numbers of years once you retires? • In this article we will see some of the disadvantages of pension plans in India and how they work. • A lot of investors think that retirement pension plans are the only way to go; and if they do not invest in these products today, then they will miss out on something. • In this article let’s talk about pension products. Before I move ahead I would like to coin two terms used in Financial planning which are very easy to understand.

4. 4 reasons why you should not buy differed annuity plans • There are better options for growth of your wealth: The accumulation of your wealth happens in a pension plan for many years, but it’s not the best way your money can grow, ultimately if you had to invest your money in equity (underlying asset class), you have simple and no-cost options like mutual funds, index funds. Also you can choose to put money in real estate. A regular SIP in an equity diversified mutual funds should give much better returns then accumulation in a pension plan (read unit linked products). 2. No predictable returns for annuity: • The core function of a pension plan is to give you pension. But do you know how much returns you will get out of your retirement pension planWhen time comes for retirement? A lot of pension products do not give a clear idea on how much will you get at the end. What is the return earned is around mere 4%? What will you do? The same is true for NPS.

5. 3. Rigidness and no flexibility Almost all the pension products are rigid in taxation and what you can do with your money at the end. Under current laws you can withdraw only 1/3rd of your accumulated money tax-free, where as there is long term capital gains at the moment is 100% tax-free. Also it’s compulsory to buy annuity for the remaining money. 4. High charges Who does not know how ULIP’s and other similar products have charged so high costs for initial years without giving clarity to customers. These annuity plans also have high allocation charges many times and customers do not know about it and can’t do much later when he acknowledges it! So why do you want to pay high fees for these products? Conclusion: It’s suggested that you invest in some instrument which does not have any rigidness on what can be done with your investments at some later stage, like Mutual funds, Direct Equity, PPF, Index Funds, Real estate or even old fashioned products like FD, NSC, KVP… you can always buy some immediate annuity plans or create your monthly income through ways of renting out property, getting FD interest or plain dividends from stocks or any combination of these. • [Source: http://www.jagoinvestor.com/2011/10/pension-plans-drawbacks.html]

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