10 Best Pension Plans in India: Key Features, Benefits, and More!

When you start earning money, with every growing financial year, one worry continues to disturb you- will I be financially secure in my old age? Will there be enough to sustain the financial needs of my family and myself? Do not worry anymore. With pension plans you will be able to save money over time and can also generate a steady income even after you retire. To help you choose the best government pension plan in India that suits your financial requirements, this blog enlists the top 10 best pension plans in India along with their features, benefits and other necessary details. 

What are Pension Plans in India?

A pension plan is a way to save money over time, so you can get a steady income after you retire. For senior citizens, there’s also an option to deposit a large amount of money upfront and then receive payments regularly—either every month, quarter, half-year, or once a year.

However, if you start saving early, a pension plan becomes a medium- to long-term goal. You can set it up for yourself or with your spouse to ensure a comfortable life after retirement. This type of planning involves carefully choosing the right investment option to help you build enough savings to meet your retirement needs.

Why Do You Need Pension Plans?

Some of the benefits of getting a pension plan for planning your retirement securely are as follows:

• Based on your investment plan, you can receive a steady, fixed income either after retirement or right away (with an immediate plan). 
• You can contribute either through regular payments or one large sum.
• If the policyholder passes away during the plan’s term, the nominee can receive a death benefit. This can be a lump sum, regular installments, or continuing the policy, depending on the type of pension plan.
• While retirement plans are usually long-term with limited access to funds, some plans let you withdraw money during the savings phase, providing a backup to handle unexpected expenses.
•  Payments made toward pension plans and the benefits you receive are eligible for tax deductions under Sections 80C, 10(10D), and 10(10A) of the Income Tax Act, 1961.

How Do Pension Plans Work?

When choosing a retirement plan, whether it’s an annuity-based plan or a ULIP pension plan, follow these steps:

Step 1: Decide your retirement age and choose an insurance policy accordingly.

Step 2: Select the premium amount, how often you’ll pay (monthly, yearly, etc.), and the length of the policy.

Step 3: Pick your vesting age, which is when you’d like to start receiving payments, and decide how you’d like to get the money (in one lump sum or regular installments).

Step 4: Provide basic information about yourself and your partner or beneficiaries, if needed.

Step 5: Pay the premium or set up automatic payments to ensure regular contributions.

For an annuity-based plan, you can choose to receive payments either as a lump sum or on a recurring basis after one year, or even up to 10 years after reaching a certain retirement age. With ULIP (Unit Linked Insurance Plan) pension plans, you can access your money only after five years of the policy term.

Note: These steps are the general process of investing in pension plans. Individual processes would vary from bank to bank. It’s best to visit the official bank website or talk to their customer care executive to know more about your desired bank’s pension plan. 

Types of Pension Plans in India

• Deferred Annuity: This life insurance plan offers a fixed income at a future date, ideal for salaried individuals with flexible premium options. You can either pay regularly or make a lump-sum payment to receive income after a waiting period. Premiums are eligible for tax benefits under Section 80C.
• Immediate Annuity: Suitable for those who can invest a lump sum and want immediate post-retirement income. Withdrawals start one year after investing, and the income may be partially tax-free if taxes were already paid on the initial investment.
• National Pension Scheme (NPS): NPS is an government-backed scheme allowing Indian citizens to invest in a pension account during their working years. It’s market-linked and managed by professional fund managers, helping build a substantial retirement fund.
• Public Provident Fund (PPF): PPF is an popular, long-term, government-backed investment option with a 15-year term. You can deposit a lump sum or pay in up to 12 installments annually, with tax benefits on contributions, interest, and maturity.
• Atal Pension Yojana: An Atal Pension Yojana is designed for the unorganized sector, offering a guaranteed monthly pension between ₹1,000 and ₹5,000, depending on contributions, starting at age 60.
• Employee Provident Fund (EPF): A retirement scheme for employees in the organized sector, where both the employee and employer contribute. After 58 years of age and at least 10 years of service, employees can receive a pension. Know what is EPF.
• Retirement-Focused Mutual Funds: These mutual funds offer market-linked returns and flexibility in investment options. Suitable for those with a risk appetite, they also provide tax benefits and liquidity.
• Annuity Plans: Provide guaranteed income post-retirement, with various options like single or joint annuity. You can choose how frequently you want the income (monthly, quarterly, etc.) and premiums are tax-deductible under Section 80C.
• Pension Plans with Life Cover: These plans offer both an investment and an insurance component. They provide a pension during retirement and financial security for the family in case of the policyholder’s death.
• Pension Funds: These are financial tools where regular contributions build up a retirement corpus, helping accumulate and manage funds for post-retirement life.
• Life Annuity: With this plan, you receive income for life, and if you’ve included your spouse, they continue receiving payments after your death.
• Guaranteed Period Annuity: Provides consistent, predetermined payments for a specific duration, regardless of market fluctuations, ensuring a reliable source of income.
• Whole Life ULIPs: These combine life insurance and investment benefits. They offer lifelong coverage and allow you to grow wealth by investing in equity, debt, or both.

Best Pension Scheme in India

Here’s a list of top 10 government pension plans in India (in no particular order): 

Key Features and Benefits of Top 10 Pension Plans

Some of the key features and benefits of the above mentioned pension plans are: