In this video, we will discuss unit linked insurance pension plans or ULIP pension plans
Pension planning has to be done for the long term since one can not expect to have a large retirement savings corpus just a few years before retirement
We generally associate retirement with superannuation
In pension plans, it is not related to superannuation, As a policyholder, you can choose your retirement period
Life insurance companies allow you to choose your retirement age and in pension plans it is called vesting age
You can have the minimum vesting age as 45 years in some plan and in other it is 50 years
One can buy these retirement plan early on in one's career
The maximum vesting age can be 70 years and in some cases, even 75 years
The freedom to choose the vesting age is not available in other categories of pension plans
Like other ULIP plans, in a ULIP Pension Plan, you get all the flexibility
For instance, any time you want, you can switch from equity fund to debt fund
There is flexibility to put your money in the fund of your choice
You can also top up your ULIP investment with the top up facility
During the period you are investing and putting the money in the ULIP Plan is called the accumulation phase
After the vesting age, there is the payout phase where the insurance starts your annuities
The annuity is typically a pension. A annuity could be at the rate of interest prevailing at that time of vesting
As a policyholder, one has the option to commute 33.33% of the corpus, However, the remaining portion will need to be taken as annuity
The commuted amount from the ULIP Pension Plan is tax free
In case of annuities, there are many options. For instance, one can take annuity for life or till the person is alive
One can use the ULIP Plan money to take annuities from a different company than the one used in the accumulation phase
Annuity can be for a certain period, say, 20 years. If the person dies before that the annuity will be given to the nominee
There are options for joint life annuity, annuity for life and annuity certain and life thereafter
Annuity certain could be for 10 years and on survival it will be converted to annuity for life. Such options exist
ULIP Pension plans help you save regularly for retirement and inculcate the investment discipline
Of course, one has provident fund but that is not enough to meet retirement needs
In ULIP Pension Plan you can put your money in an ULIP equity fund to get long term growth and then use switching facility to secure gains near vesting age
You also get tax deduction for your ULIP Pension Plan investments
With ULIP Pension Plan you don't need to work hard to ensure regular income out of retirement savings
Commutation gives you tax free lump sum at the beginning of retirement
You will need to compare ULIP Pension plans with other retirement savings options
What will work for one will not work for another