Pension Plan

Pension plans provide income during the retirement years. Increasing longevity and rising cost living make it nearly impossible to live without adequate subsistence income in old age. Pensions Plans (Annuities) are a viable source of income in old age when body and mind are not capable to generate income.

While a life insurance policy covers the risk of dying too early, a pension policy covers the risk of living too long. During the earning-years, one creates the pension fund (also called corpus) by paying premiums to Life Insurance Company. This corpus is used to generate regular pension payments to policy holders, when they get old. Retirement planning is possible with the instruments of pension.

Immediate Annuity and Deferred Annuity

A pension plan has two phases. One is the premium paying (accumulation) phase and the other is the pension phase. Majorly, annuity plans are divided into two types: (i) Immediate Annuities and (ii) Deferred Annuities.

In immediate annuities, the policy holder (called annuitant), pays a lump sum amount as premium. Pension begins immediately thereafter. The annuitant can choose to receive annuity in monthly or quarterly or half yearly or yearly instalments. Normally, the first instalment will be paid by at the end of mode chosen by him. For example, an immediate annuity policy with date of commencement as 1st Jan 2022, the first monthly annuity payment will be paid on 1st Feb 22. If the mode of annuity chosen is yearly, the first annuity payment will be paid on 1st Jan 2023. This method of annuity payment is called as ‘annuity paid in arrears'. In the other method (called annuity paid in advance), the first annuity instalment is paid immediately on the date of payment of single premium. The first method is popular.

Deferred Annuity policies have two phases called (i) Deferment phase and (ii) pension payment phase.

Deferment phase is normally the premium paying phase, on the conclusion of which, the pension phase begins. And there are about 10 types of pension policies depending on the nature of pension benefits.

Some important pension’s plans are given here:

Sr. No.	Product Name	Date of Launch	Plan No	UIN No
1	Pradhan Mantri Vaya Vandana Yojana	26.05.2020	856	512G336V01
2	LIC's Jeevan Akshay - VII	25.08.2020	857	512N337V01
3	LIC's New Jeevan Shanti	21.10.2020	858	512N338V01
4	LIC's Saral Pension	01.07.2021	862	512N342V01