The year 2020 has not been the best year for the world evidently. Considering the positions of most of our NRI friends across the globe, financial management has been one of the top priorities and concerns. In this article, we will address the underlying aspects of financial management for NRIs with a focus on the Best Retirement Plans for NRI in 2020.
As Mrs. Shruti Agarwal (CFA, Co-Founder of CAGRFunds) iterates: There are 3 fundamentals of Financial Planning:
- Emergency Fund
- Health Insurance
She stresses on the importance of managing these three pillars of financial planning. In a recent webinar on NRI Investments in India during Covid-19: Financial Planning and Approach, Shruti Agarwal gave insights on how to invest in the present times. Following that we have assorted the best retirement or pension plan for NRI so that they can have a financial backup post retirement.
In this article, we will cover:
- Retirement Plan for an NRI
- Types of Retirement or Pension Plans in India
- Best Retirement Plans for NRIs in India
- Best Retirement/Pension Plans for NRI: Rundown
- NRI Retirement Plans: Addressing the Need
Retirement Plan for an NRI is very essential. Especially for the ones who plan to move back to India. The NRI Status is very fluidic; for NRIs who plan to return to India, the knowledge of How long can they retain their NRI Status is important. A retirement plan is backed by many elements such as the basic questions like why should an NRI buy a house in India? Or what investments he/she must make to ensure a relaxed and convenient retirement.
The top providers such as SBI, LIC, Bajaj Allianz, and various other firms provide NRI specific Retirement Plans for fulfilling the purpose of retirement planning. Let’s first understand the types of Retirement Plans then we will move ahead and select the best retirement plans for NRI.
Retirement Plans in India cater to the needs of a wide range of insurance seekers. These Pension Plans are available in the market with multiple classifications, plan structures and benefits. The entirety of these plans can be simply divided into 11 categories:
|Deferred Annuity||-Regular/Single Premium over a policy term;|
-life coverTax Exemption (one-third of the corpus)
|Immediate Annuity||-Lump Sum payment; no life cover|
-Immediate pension provided
-Premiums are exempt from tax
|Annuity Certain||-Annuity paid for a specific number of years|
-Period can be chosen; benefit paid to beneficiary in case of death
|With and Without Cover Pension Plans||-With Cover: Has life cover included in policy; although not a very high amount|
-Without Cover: No life cover; only corpus paid to nominee
|Guaranteed Period Annuity||-Annuity provided for certain periods (5, 10, 15 & 20 years) irrespective of whether he/she survives the period or not|
|Life Annuity||-Pension paid until death|
-Post death the amount given to spouse, if “with spouse” option chosen while taking policy
|National Pension Scheme (NPS)||-Scheme by Government of India|
-Money invested in equity and debt funds as per the preference of the individual
-Can withdraw 60% amount at retirement. 40% used to purchase annuity
-Maturity proceeds aren’t tax-free
|Pension Funds||-Managed by only 6 companies allowed by government|
-Comparative better returns on maturity; long period policy
|Whole Life ULIPs||-Money invested for whole life|
-Partial withdrawals post retirement; tax free income
-Additional withdrawals allowed
|Defined Benefit||-Based on your earnings and the no. of years served under your employer|
-Both you and your employer can contribute
-ensures that you pay a specific amount from the retirement income for life
|Defined Contribution||-Retirement income not guaranteed but contributions are|
-The sum accessible for your retirement relies upon the all-out contributions made to your record and the investment returns this cash earned
-At retirement, you utilize the cash in your record to produce a retirement remuneration
Retirement Plans can be tricky to understand and complex to choose. But fret not! We have got your back. In the next segment, we will look into the best retirement plans for NRIs in India.
|Plan||Minimum-Maximum Age||Policy Terms/Annuity Options||Annuity to Spouse||Tax Benefits|
|Tata AIA Guaranteed Return Life Insurance Plan||8-60 years||Policy Term: 5-65 years||Available in case of Whole Life Plan||U/S 80CC and 10(10D)|
|LIC Jeevan Nidhi Plan||20-60 years||Life Annuity and 5, 10, 15, & 20 years thereafter||50%||U/S 80CCC|
|Bajaj Allianz Life Pension Guarantee Plan||37-80 years||Life Annuity and 5, 10, 15, & 20 years||50 & 100 percent||Applicable|
|LIC Jeevan Akshay||30-65 years||Life Annuity and 5, 10, 15, & 20 years thereafter||50 & 100 percent||N.A.|
|National Pension Scheme (NPS)||18-60 years||–||–||Upto 2 Lakhs|
Disclaimer: SBNRI does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply
- Tata AIA Guaranteed Return Life Insurance Plan: The plan aims at creating a fund for you that you might need for your post retirement lifestyle, buying your dream house, or your child’s education or marriage. The Plan basically protects you from financial turbulences. The plan offers the flexibility to choose from three different plan options which include endowment, regular income or whole life income. Under the whole life option, you can also cover your spouse.
- LIC Jeevan Nidhi Plan: It is one of the most sought after retirement plans for NRIs. Choose from a range of 5 different plan variants. You can either go for a lifetime annuity or book it for a period of 5, 10, 15 or 20 years irrespective of the survival period. You can also opt for a return of purchase price in case of death along with a payment of 50% annuity to the spouse. The Plan also provides you the benefit of getting a 3% increment on annuity every year and various other insurance benefits
- Bajaj Allianz Life Pension Guarantee Plan: Hailed as a plan for steady income post retirement, Bajaj Allianz Life Pension Guarantee Plan provides you the benefit of choosing the payout cycle- 1 month, 3 months, 6 months and annually. Annuity options again have varied options providing immediate annuity benefits (annuity for lifetime return of the purchase price upon the death of the annuitant) along with options for periodic annuity of 5, 10, 15 and 20 years. Other options such as Coverage to the spouse along with 50 percent of annuity to the spouse in case of death of the annuitant , 100 percent annuity to the spouse in the event of death of the annuitant and 100 percent annuity to the spouse with return of purchase price in case of death of the last survivor are also available.
- LIC Jeevan Akshay: It is a lump-sum payment plan. The minimum purchase value is 1 lakh and 1.5 Lakhs for online sales. The LIC Jeevan Akshay is an immediate annuity plan for lifetime. Other features include payment of annuity for 5, 10, 15 and 20 years along with a 3% increment annually after the specified period till you are alive. Payment of 50 and 100 percent of annuity to the spouse, and return of purchase price in case of death of the policyholder are also the highlighting features of the policy.
- National Pension Plan (NPS): There are no lower or upper limits to the number of contributions per year. The Subscriber is free to manage the frequency and amounts of contributions. There are two types of Accounts under NPS:
Tier 1: Money in this account is locked until retirement. If you retire before the age of 60 you may take 20% of the investment as cash (tax-free). The remaining 80% is invested into an annuity (an investment that pays you a fixed yearly amount). If retiring after 60, then a minimum of 40% must be annuitized and the balance can be withdrawn lump sum (tax-free).
Tier 2: Only tier 1 account holders are allowed to open tier 2 accounts. Tier 2 accounts allow you to deposit and withdraw money as you wish. There are many types of investments that you can choose from (Equities, Corporate Bonds, Government Bonds etc.) also referred as (E, C & G) to help you to create an effective investment strategy.
You can withdraw the corpus amount if it is lesser than INR 2 lakhs.
Retirement Planning is not just a choice but a need in the present time. Shifting your strategy towards creating a retirement corpus is essential to match your lifestyle requirements and fulfilling financial needs. In the next segment we will discuss the importance of planning your retirement.
Taking into account the necessities of people and the effect of inflation on the finances, NRIs must address the indispensability of retirement plans. In a nutshell, you browsed through the above mentioned NRI Retirement Plans offered by the top providers in India.
Introspect upon how much time is left for your retirement and start planning it efficiently and consider investing in a pension or retirement plan to ensure a satisfactory life post retirement. The world is pacing ahead. You can access everything at your fingertips. It is recommended that you stress on the three pillars of financial planning and get a well suited retirement plan for yourself. With easy online processes, getting a good plan has simplified itself.
Envision your requirements and opt for the best suitable retirement plan as per your needs.
Contact us by clicking the button below to get a detailed investment advisory strictly structured around your financial needs. Have a contentful and happy life post your retirement!