Where to invest in the retirement plans in India
The government introduced the Employees’ Provident Fund Organisation (EPFO) in 1952. This plan was meant to provide a kind of social security. It was launched to cover the working population in India. The retirement plan was meant to ensure that workers have enough money at their disposal when they retire. Multiple companies provide their employees with such plans. Please read this article on where to invest in retirement plans in India to know more about it.
There are options to select from the list and select the right retirement plan that fulfills your requirement. They are as follows:
Public provident fund: The public provident fund is a scheme that the government of India offers for the benefit of its citizens. this is one of India’s most popular investment plans and has been around since 1957. It is a type of investment plan that has a lock period of 15 years, and it means that the funds that you have invested cannot be withdrawn till the time 15 years are not complete.
It was conceived as a retirement plan in India but has been modified several times over the years so that it can be used by people who want to save money for other purposes like buying property or starting their own business. The PPF account can also be opened by minors below 18 years old yet and earn interest as if they were adults. However, they cannot withdraw money from these accounts until they turn 18.
The interest rates on this plan can vary depending on how much you invest in it and when you deposit your money into it. For example, if you put in Rs 1 lakh today, then after 15 years, your total balance would be around Rs 1.45 lakhs, which means that you would earn around Rs 37000 extra interest on top of your initial investment.
Insurance-based plans:
There are a great number of insurance plans that support retirement plans in India. There are two insurance plans, both of which require the investor to pay the premium regularly.
An annuity is a contract between an insurance company and an individual in which the insurer agrees to pay regular income to the individual after retirement. Annuity plans are available as fixed or variable ones.
Pension plan: A pension plan is a contract between an employer and employee wherein the employer promises to pay a fixed amount of money to an employee every month on retirement.
Income drawdown plan: You don’t need to buy an annuity or pension when you wish to withdraw money from your investments. You can take out funds as per need or according to your convenience using income drawdown schemes like stocks and shares ISAs (SISA), bonds and gilts ISAs, investment bonds, etc.
National type of Pension scheme
The National Pension Scheme (NPS) is a retirement-based scheme where apart from the monthly pension payment, a good amount gets paid when the investor has achieved the age for retirement.
they started to provide an alternative to the Employees’ Provident Fund (EPF) and served as an avenue for people to save for their retirement. It is designed in such a way that it provides financial security to people during their old age. It also helps them meet unforeseen expenses like medical emergencies or education fees for their children.
The NPS is available for government employees, private sector employees, and self-employed individuals. It is open even to those who do not have any EPF account but have been contributing towards retirement benefits under other schemes such as LIC Housing, LIC Jeevan Akshay Nidhi and Post Office Deposits Schemes, etc.,
The NPS offers tax exemption on interest income up to Rs 50,000 per financial year and on maturity value if one keeps his funds invested in NPS till his retirement age of 60. After retirement, however, one can withdraw his money from NPS without paying any tax if he wishes because he will have crossed 60 years of age by then.
Employee provident fund:
An employee provident fund is a type of fund for the employee and the employer and gets contributed in equal proportions once the employee retires. Then the employee will recieve the final amount over the years he has worked and the amount of interest.
The main objective of an EPF account is to provide financial security to employees after retirement. It is a savings scheme where an employee contributes 12% of his salary towards his provident fund account. Employers also contribute 12% of their salary to it. The employee must compulsorily have this account if they work in any company or public sector company (PSU).
There are three types of EPF accounts-
Employee provident fund scheme 1952: The central government introduced from 1st January 1953 under EPF Act 1952 with limited coverage and contribution only by employers.
Employee provident fund scheme 1968: It was amended from 1st January 1969 with the extension of coverage to all establishments employing 20 or more workers and contribution by employees and employers.
Employee provident fund scheme 1976: It was further amended from 1st January 1977, with the extension of coverage to all establishments employing 10 or more workers irrespective of the number employed at any point.
Conclusion
Since you can’t even start investing in a retirement plan in India without meeting your salary, setting the retirement target is one of the first things to do. Having a good balance is also a very important step, and it will make you have fewer regrets about going for more rather than for more security. Even worse, delaying your retirement age because of this may still leave you with less money when you retire but with bigger expectations as well. The best way to reach your retirement goal is by taking small steps. The most important thing is to set a target and stick to it. You can always adjust it later on if you feel like you need more time or if the market doesn’t allow for the amount of money that you have in mind right now.
