Pension planning: Top 5 regular income

options after retirement

Pension planning: Top 5 regular income options after retirement

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Provided by The Financial Express The tenure is five years (lock-in) and can be
extended once by next three years.

The current life expectancy for India in 2020 is 69.73 and it is increasing every year.
The retirement age of the individual in India is generally 60 years. In order to sustain
a good standard of living, one needs to plan ahead so as to get a regular income post
retirement. The fixed deposit rates in banks are consistently going down and retirees
who depend on regular interest in FD are feeling the pinch.

Annuity policy provides a regular source of income to annuitants post-retirement. The

premiums to be paid towards purchasing this plan can either be made in a lump sum
(single premium) or regular instalments (regular premium) over the defined premium
paying term.

Annuity plans

There are two types of annuities- immediate and deferred annuity. In immediate
annuity, you get pension immediately after paying a lump sum amount to the life
insurer. In deferred annuity, you get pension after a defined time period. The
advantage of annuity plans is the regular and guaranteed payout for your entire life.
However, the rates offered on these plans are currently on the low side. The annuity
rates are not very transparent and are in the 5-6% per annum bracket and are entirely
taxable.
Diversify your investments

For a steady cash flow or pension an individual having a lump sum amount at his/her
retirement age should explore other investment options also apart from purchasing an
immediate annuity plan. The options are as follows:

Senior Citizen Saving Scheme: It is a government sponsored scheme offered by

banks and post offices for individuals aged 60 years and above. The current interest
rate is 7.40% per annum and its rates vary every quarter. Once invested, the rate
becomes constant for the entire tenure. The upper limit for investment is Rs 15 lakh
per individual. The payout frequency is quarterly and interest income is fully taxable.
The tenure is five years (lock-in) and can be extended once by next three years.

Pradhan Mantri Vaya Vandana Yojana: It's a guaranteed pension product offered
by LIC with death benefit for retirees. An individual aged 60 years and above can
invest in it. The current interest rate is 7.4% per annum paid monthly and its rates
vary yearly. Once invested, the rate becomes constant for the entire tenure.

The upper limit of investment is Rs 15 lakh per individual for monthly payout and
pension amount is fully taxable. The tenure is 10 years with lock-in period.

Post Office Monthly Income Scheme: It is a five-year investment with a cap of Rs 9

lakh under joint ownership and Rs 4.5 lakh under single ownership. The interest rate
is set each quarter and is currently 6.6% per annum, payable monthly.

Bank FD for senior citizens: It is one of the favourite instruments for senior citizens
because of assured interest returns. Banks generally provide 50 basis points more
interest rate to senior citizens.