A pension is an arrangement to provide people with an income when they are no longer
earning a regular income from employment. Pensions should not be confused with severance
pay; the former is paid in regular installments, while the latter is paid in one
Pension Plans are individual insurance plans that impact your future by providing
financial stability during old age when it is needed the most. Pension plans are
suitable not only for senior citizens, but anyone planning for a secure future.
The common use of the term pension is to describe the payments a person receives
upon retirement, usually under pre-determined legal and/or contractual terms. A
recipient of a retirement pension is known as a pensioner or retiree.
Retirement plans may be set up by employers, insurance companies, the government
or other institutions such as employer associations or trade unions. The plans are
typically in the form of a guaranteed life annuity, thus insuring against the risk
With an increasing number of young Indian professionals moving away from traditional
joint family structure, parents have realized the need to be careful for their retirement
years & have financial security. Pension plans are their best friend offering a
comprehensive long term financial plan for retirement years.
Insurance companies offer various pension plans (also called as retirement plans
or annuity plans) where a person has to initially invest either a lump sum amount
or regular annual installments/ premiums over a period of time in return for regular
income either for life or for fixed number of years depending upon the plan.
Deferred Annuity Plan:
Under this type of plan, the pension is not paid immediately but deferred for a
time period as required by policyholder. If the policyholder survives the term of
the policy, then the accumulated amount (consisting of sum assured, guaranteed additions
and bonuses) is invested to generate regular income.
Immediate Annuity Plan:
This plan can be purchased for a lump sum in return for fixed payments throughout
life. Insurance companies offer various options under annuity plans. There are different
categories of Immediate Annuity plans: