Annuities Story

• Did you know that the biggest risk for an average 30-40-year-old Indian without an inflation-linked guaranteed pension is that of living too long? And if your reaction to the above statement refers to working till you die or that your progeny will take care of you in your reclining years, stop. And think. About the time when you will be 80 years old, without a means of income on your own, completely dependent on someone else. Pension planning, therefore, is critical. Some retirement products like the public provident fund (PPF) allow you to accumulate over the years, and return a corpus. A pension product, on the other hand, takes in your regular contributions over your earning years, and then pays you regularly starting your vesting age the age at which you intend to retire. Insurance companies offer two kinds of pension plans - endowment and unit linked. Endowment plans invest in fixed income products, so the rates of return are very low. Unit-linked plans are better, as they are more flexible. You can stop contributing after 10 years and the fund will keep compounding your corpus till the vesting date. You can opt for higher exposure in the stock market for your plan if your risk appetite allows it. Lower risk options like balanced funds are also offered. Though insurers may try to sell you a life cover bundled with your pension plan, stay with your pure term policy and buy a pure pension plan to maximize post-retirement benefits. Select a plan that gives the maximum maturity value. The ultimate value of your pension fund corpus will depend on costs, fund management, and market performance over the years you pay into the fund. Fund management and market performance is never under your direct control; so you might not be able to do anything much about them. But you can definitely shop around to find a plan with the highest projected maturity value based on past performance as well as lowest costs. Did you know that, after retirement, you can ask your insurer to transfer all the funds to another that gives a higher pension, at no extra cost? Such tips will help you to maximize your capital appreciation that will ensure your golden reclining years.