In recent years, pension and retirement plans have become quite popular in India, owing to increasing awareness about financial planning, government initiatives, and the wide availability of options. While some people are investing in pension plans to secure their future, others are doing it to ensure a worry-free retirement life for their parents.
All in all, pension plans are a must-have investment, as they enable financial security, stability, and, most importantly, financial independence. Whether you wish to explore the world, embark on a new business venture, or simply enjoy life – investing in a pension plan will ensure that all your post-retirement needs are taken care of.
What’s better? There are several types of pension schemes and plans that you can buy, depending on your monetary goals and needs. Plus, there are also a few tax benefits that you can enjoy by purchasing one. If you wish to know more, make sure you keep reading. And if you already have a pension plan, stay tuned, as we’re going to discuss the steps on how to check pension online. Let’s get started!
Key Takeaways
- A pension plan is an investment fund that can be used to meet your post-retirement needs and wants.
- There are two primary types of pension schemes available in India: One is where you invest money into the plan over the years and receive the accumulated fund upon retirement. The second one is where you buy an annuity by paying a lump sum and receive the amount in instalments.
- The pay-out methods for pensions plans are lump sum, monthly instalments, and lump sum + monthly instalments.
What is Pension: Understand the Basics?
In simple terms, a pension is a savings fund that you utilize to support your needs during your retirement years. A pension is a great way to ensure financial stability and security, as you continue to have a steady income flow even after retirement.
While some people start retirement planning early on in their 20s and 30s, others do so in their 40s and 50s. Nonetheless, it is crucial to plan ahead, so you can enjoy your golden years without worrying about finances. The best part? Today, there are several pension and retirement plans that you can invest in.
These plans are designed to help you meet your post-retirement expenses and can be considered as income replacement. However, there are two main types of pension plans available in India. The first one is where you invest a fixed amount over a specified period (5 or 6 years, for example), and then the accumulated amount is provided to you as a pension. You can choose to receive the pension in a lump sum or opt for monthly payments by the insurance provider.
The second type of pension plan is where you can buy an annuity plan by paying the amount in a lump sum (Rs. 10 lakhs, for example), and then you receive the pension as monthly payments. You can choose to start receiving the amount immediately or later, as per your preference.
Additionally, the premium amount (which is the sum you invest) is decided based on several factors. These include the sum assured, coverage benefits, inclusions & exclusions, and policy tenure.
Pension Plans: Who is it for?
A pension plan is for everyone, as we’re all going to retire eventually. Although most people invest in pension schemes to meet their daily expenses, you can also use the fund for travelling, starting a new business, buying yourself a new car, or anything else that you’ve planned for your post-retirement life – which is one of the greatest benefits of pension plans.
Moreover, pension plans can come in handy to meet unforeseen expenses, especially those related to medical issues. Plus, you can avoid monetary losses or debt, which is the last thing anything wants to face during their retirement years.
But while purchasing a pension plan is a great idea for everyone, it is vital to keep your financial goals (both short-term and long-term) in mind. For instance, if you are planning an early retirement, you should invest a higher sum in a pension plan. Similarly, you should also evaluate post-retirement financial obligations (your child’s education, for example), day-to-day expenses, liabilities (such as loans), dependents, and wants.
In addition, it is always important to consider inflation. Did you know that in India, inflation spiked to an all-time high in February 2022 primarily because of high food prices? So, you can only imagine the rise in inflation by the time you retire. Hence, always keep inflation in mind while planning your pension fund.
Advantages of Buying a Pension Plan
Before we move on to discussing the steps on how to check pension online, let’s look at some of the key advantages of buying a pension plan:
Financial Security and Stability
Once you retire, you won’t have a regular income to meet monthly expenses, pay off loans, or look after your loved ones’ needs, leading to stress and financial burden. However, this doesn’t necessarily have to be the case, as you can ensure a steady income flow even during your retirement years by buying a pension plan. This will further enable you to be financially secure and stable even when you’re not working full-time.
Tax Benefits
A significant reason why pension plans and schemes are gaining popularity in India is the tax benefits that come with them. As per Sections 80CCC and 80CCD of the Income Tax Act of 1961, you can claim tax exemptions of up to Rs. 1.5 lakhs for the amount you pay towards pension plans. Plus, the sum you receive from pension schemes is also tax-free; however, this can vary from one pension policy to another.
Customization Options
Whether you purchase a deferred annuity pension plan or an immediate annuity pension plan, the insurance provider will offer several customization options. The plan can be personalized by opting for riders or add-on covers, such as critical illness rider and total permanent disability. This is a great way to enhance the coverage of your pension scheme and receive more benefits.
Multiple Pay-Out Options
When you purchase a pension plan, you can choose the pay-out method as per your preference. There are typically three options available: First, you can opt to receive the entire fund as a lump sum payment and utilize it as you like. Second, you can select the option to receive the amount in instalments (monthly or quarterly). The last method is to receive part of the fund as a lump sum and the remaining as instalments.
Safety Net Against Unforeseen Events
We all know that unforeseen events can knock on our door at any time, be it a financial crisis or medical emergency. But while we face such situations with all we’ve got, the expenses can sometimes become a burden. However, investing in a pension plan will ensure that you have sufficient funds to mitigate unexpected events that may otherwise leave you in debt.
Did You Know?
The National Pension Scheme (NPS), which was launched by the Indian government in 2003, had close to 14 million subscribers as of 2021. However, a large part of the Indian population is still not covered under pension and retirement schemes.
Source:https://www.statista.com/statistics/1027918/india-national-pension-system-subscribers/
Checking Pension Status Made Easier: How to Check Pension Online
As we head towards a digital India, the government has launched various E-services, including checking the status of your pension online. This means that you don’t have to visit the pension office or stand in long queues, and all you need is an internet connection and a device.
First, we will look at how to check pension status through PPO:
Step 1:
Visit https://mis.epfindia.gov.in/PensionPaymentEnquiry/pensionStatus.jsp
Step 2:
Click on ‘Issued Office’ and select the relevant option from the drop-down menu. The office ID will be generated automatically.
Step 3:
Enter the Pension Payment Order (PPO) number.
Step 4:
Press ‘Submit’, and the details will be displayed on the screen. This will include your name, date of birth, type of pension plan, and the status of your pension payment.
That covers the steps for how to check pension online through PPO.
Next, we will look at how to check NPS account status, and here are the steps:
Step 1:
Visit https://enps.nsdl.com/eNPS/NationalPensionSystem.html
Step 2:
Click on ‘Open NPS Account/Contribute Online’.
Step 3:
Next, select the ‘Login with PRAN/IPIN’ option, after which you will be redirected to another page.
Step 4:
Enter your PRAN/IPIN details along with your password.
Step 5:
After successful submission, you will be able to access your NPS account, and you can check the status.
So, now that you are familiar with how to check pension online, you can try any one method that you prefer. However, it is important to ensure that you enter the correct details and always save a copy of the receipt/slip for future reference.
Word to Remember
Annuity
An annuity is an investment agreement between you and an insurance company in which you make a series of payments (lump sum or installments). In exchange, the insurer provides you with a steady income flow either immediately or upon retirement.
Conclusion
As we discussed, pension and retirement plans are an excellent way to secure your (or your loved ones’) golden years. Even better, pension schemes won’t burn a hole in your wallet, as they are quite affordable. So, make sure you invest in one today. And if you already have, ensure you follow all the steps for how to check pension online that we discussed. See you later!
FAQs
If you wish to calculate the amount you should invest in a pension plan, you need to evaluate your daily/monthly expenses, liabilities, retirement age, and inflation. However, you can also use an online pension plan calculator.
Although anyone can buy a pension plan, the minimum age requirement is usually 18 years, and you should also be an Indian resident.
Yes, as per Sections 80CCC and 80CCD of the Income Tax Act, pension schemes are subject to tax benefits in India.
In pension plans, the vesting age is the age at which you will start receiving the pension. It depends on the insurance company and the type of plan you buy.
Yes, you can purchase riders with your pension policy by paying an extra premium.
