Planning your return after retirement? A guide for NRIs looking to buy pension plans in India

Buying a pension plan, is a way to ensure a steady flow of income after retirement. A pension is essentially a fund where you invest a regular sum of money during your employment years and can draw payments from once you retire.

For many non-resident Indians, returning to their home country is part of their retirement plans. For NRIs, planning ahead becomes even more crucial, keeping in mind future money-value fluctuations, lifestyle and expenditures.

Buying a pension plan, is a way to ensure a steady flow of income after retirement. A pension is essentially a fund where you invest a regular sum of money during your employment years and can draw payments from once you retire.

Depending on your policy, you can also avail tax benefits and exemptions in India. Pension plans provide an unconditional protection from investment risks.

The categories offered in India, you can make use of:

• Immediate Annuity: Pension starts immediately after you purchase a policy and deposit a lump sum amount.
• Deferred Annuity: A corpus is accumulated over the policy term, and pension starts after the term is over.
• Annuity Certain: Pension is paid in multiple payments over a set period of time chosen by you.
• Life Annuity: Pension is paid to you for your lifetime. In case of an unfortunate event, your spouse is entitled to the pension.
• With Cover: Plan includes an insurance cover that entitles dependents to a lump sum amount in case of an unfortunate event.
• National Pension Scheme: Managed by the central government, you can withdraw 60% of the amount at retirement while 40% must be used to purchase an annuity.

For most plans, minimum age of entry is 30 years, while maximum age is 75 years. In most cases, the minimum vesting age is 45 years while the maximum age is 80 years.

Vesting age: The age at which you start receiving your pension payments.

The duration of the plan generally ranges from 10 years to 30 years. While there is no maximum limit on an annual premium amount that is required, the minimum annual premium amount is close to Rs 50,000 in most cases and generally, the premium has to be paid for the same period as that of the chosen policy term.

Keep in mind these steps:

• In case of existing India-based accounts, you should let the pension paying branch know you're an NRI.
• The branch will then convert your account to Non-Resident Ordinary (NRO) account.
• You will also have to provide a ‘life certificate’ issued by an authorised official of the Indian Embassy or the bank’s branch in the country you reside in, once in a year, in November.
• The paying branch will credit the amount of pension due every month to your NRO account.

NRO account: A bank account opened in India in the name of an NRI, to manage the income earned by him in India.

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