Six investment Schemes for Your Post-retirement Needs.

As an individual, you need to engage in financial planning with an aim to build a corpus on which you can bank in case of needs to meet your family commitments and ensure a contented and comfortable retired life. You also need to provide for your family in the unfortunate scenario when you are not around so that the requirement of your family is met in your absence. Whether you are in the public or private sector, a self-employed professional, a businessman or a freelancer; you need to invest, not only to meet your short-term goals but also for your long-term needs post-retirement. It is never too late to start planning for the future, but it is also prudent to begin before it is beyond any scope of redemption.

What to look for?

You need to look for investment products that are purely designed to fulfill your needs post-retirement. You also need to factor in the maximum benefits that are offered in the selected products. You need to assess various aspects of the products before you opt for one that suits you best. Whether a product is safe and secure offering multiple benefits, good and reasonable returns, flexibility and catering to your capacity to invest as well as easy in maintaining them in the long run, considering the technological advances in this field, is the various parameters you need to look into before committing.

Six investment options for your post-retirement needs:

Considering all the factors and your specific goals, you have multiple products to choose from. Depending on your positioning, compulsions, purpose of tax saving investments and ease of operations, you may shortlist the following investment products. They are likely to meet your individual need to the best. You need to select the best investment option among these as a step to achieve your goals and set target. The products that need a careful study to opt for are:

National Pension System (NPS)
Public Provident Fund (PPF)
Atal Pension Yojana (APY)
Employees Provident Fund (EPF)
Mutual Fund Schemes (Retirement focused)
Life Insurance Pension Plans

National Pension System (NPS):

The National Payment System (NPS) was introduced by the Government of India instead of defined pension benefit to all employees who came into service after 1st January 2004. Though initially it was designed for government employees only, from 2009 all citizens between 18 and 60 were brought within the ambit of this scheme. It is a voluntary long-term investment scheme that is administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It offers you long-term financial security at a later stage in your life when you are retired. You have to invest regularly into a fund till sixty years of age. With these funds invested in equity and debt instruments in conjunction with the compounding of the returns, the corpus attains a healthy growth over a long period.

Types of NPS: There are two types of NPS accounts.
Tier I: It is a basic account with limits on withdrawal. On retirement at 60 years of age, you are allowed to withdraw 60% of your contribution and the remaining 40% has to be used for the purchase of an annuity from approved life insurers.
Tier II: These accounts have no limits of withdrawal and are more flexible.
How does it operate?
You have to invest till you retire at 60 years of age, known as the deferment period.
On retirement, you start to get an annuity from a pension plan purchased from an approved life insurance company with 40% of your corpus.
The returns during the deferment period as well as the annuity are not guaranteed and are dependent on the asset classes consisting of Equity, Corporate or Government Bonds where the funds are invested.
The invested amount is tax exempt, but the annuity receipts are taxable as per law.
Tax Benefits: You get a tax exemption for your contribution under Section CCD (1) of the Income Tax Act, 1961 within the overall limit of Rs.150000/- under Section 80C. You can also claim an additional exemption of Rs.50000/- under Section 80CCD (1B).

Public Provident Fund (PPF):

The Public Provident Fund is a tax-savings instrument guaranteed by the Central Government. The tenure is confined and locked for a maximum of 15 years, which can be further extended by another five years. The compounding formula on returns and being fully tax-free makes it a very popular investment plan for your long-term goals.

Salient Features of PPF:
Any Indian citizen is eligible to open a PPF account.
The lock-in is for 15 years.
The minimum contribution per year is Rs.500/- and the maximum Rs.150000/-.
Withdrawal is allowed to a limit of 50% of the previous year’s balance from the seventh year onwards.
The rate of interest paid from 1^st January 2018 is 7.6%.
Tax Benefits: Your annual contribution is exempt under Section 80C of the Income Tax Act 1961 up to a limit of Rs.150000/- and receipt of a lump sum on maturity is fully tax exempt.

Atal Pension Yojana (APY):

Atal Pension Yojana is a government-backed deferred pension plan targeted toward the unorganized sector, which is between the age of 15 and 40 years with a savings bank account. There are five options in the scheme providing guaranteed monthly pension ranging from Rs.1000 to Rs.5000/- when you reach the age of 60 years. The determinant factor for the premium is the amount of pension you choose to receive.

Salient Features of APY:
It is a social security scheme launched by the Government of India.
Pension payment between Rs.1000 and Rs.5000 is guaranteed. However, if the actual returns are higher, it is passed on to you.
In case of death, the pension will be paid to your spouse.
In case of your and spouse’s death, the entire corpus will be returned to your nominee
Tax Benefits: Your annual contribution is exempt under Section 80CCD of the Income Tax Act 1961 within the overall limit of Rs.150000/- under Section 80C.

Employees Provident Fund (EPF):

Employees Provident Fund is targeted towards the organized sector and is controlled by the Government of India. What this scheme envisages the employer contributes a monthly contribution by an employee and a like amount. The contribution from both ends is a maximum of 12% of the salary comprising of basic pay, dearness and retaining allowance. You get the entire amount in a lump sum on retirement.

Salient Features of EPF:
You will be allotted a Unique Account Number (UAN) when you become a member of EPFO to manage your identity.
The rate of interest applicable from 1^st of April every year when declared.
The current rate of interest is 8.55%
Tax Benefits: Your annual contribution is exempt under Section 80C of the Income Tax Act 1961 within the overall limit of Rs.150000/-.

Mutual Fund Schemes – Retirement oriented:

The retirement-oriented Mutual Fund Schemes are designed to yield inflation-adjusted high returns over the long term. The schemes have various lock-in periods and can be redeemed after you attain 58 years of age. Prior redemption attracts up to 3% exit load.

Benefits of Mutual Funds investment:
Low cost: You can start with a sum as low as Rs.1000/-
Liquidity: There is no lock-in period, and you can withdraw funds whenever needed.
Inflation proof: The investments keep pace with inflationary trends and your returns are not eroded.
Tax efficient: Equity funds of less than three years attract short-term gains tax of 15%. Your short-term gains from debt funds are added to your income, and you are taxed as per the income tax slab you fall in. Long-term capital gains do not apply to Equity funds, but 10% tax is levied on debt fund gains without indexation and 20% with indexation.
Dedicated retirement is saving Mutual Funds: There are four Mutual Funds with a focus on retirement. They are:
Franklin Templeton India Pension Fund
UTI Retirement Benefit Pension Fund
Reliance Retirement Fund
HDFC Retirement Savings Fund

Life Insurance Pension Plans:

The Life Insurance companies offer many plans that are designed to offer you various options to meet your retirement needs. The returns from these schemes are lower as it guarantees assured sums and death benefits with life cover. This scheme is ideal for conservative investors. The best investment option with life insurance companies is their Unit Linked pension plans which guarantee market linked returns with lower volatility.

Salient Features of Life Insurance Pension Plans:
Dual Benefit: It is an investment as well as insurance with life cover.
Guaranteed Income: A fixed deferred income is assured after retirement.
Liquidity: The liquidity in a pension plan is low, but some insurers allow withdrawal during the accumulation period.
Vesting age: Most pension plans have a flexible vesting age or the age when you start receiving a pension. The range varies from 40 to 90 years in case of some.
Tax Benefits: Your annual contribution is exempt under Section 80C of the Income Tax Act 1961 within the overall limit of Rs.150000/-.

Conclusion:

Though only the six have been shortlisted for investment for post-retirement needs, there are other options also, and you need not to be confined strictly to these. There is no close jacketed option for the best investment option concerning your retirement plan. It is often a combination of investment options that can serve your purpose better. The final aim is to build a robust corpus to help you lead a comfortable retired life.