Nowadays, there are several reasons for these retirement pension plans becoming popular-

Cultural and Social Paradigm Shift

The joint family system is crumbling slowly and gradually. Nuclear families are becoming more and more popular and parents are increasingly under pressure to provide for their own income after retirement. Secondly, to have an independent income in their old age is preferred by the older generation itself as they are more independent minded, and they do not wish to depend upon their children for financial survival.

Rising Costs of Living

In the olden days, after retirement, people could survive on a minimum expense but now they need retirement pension plans to stay comfortably and maintain a good standard of living. Since in modern times, the costs of living has gone up very high, it is essential to have solid financial backup in case of any emergencies. In older age, the costs of medical care are high and in most cases, insurance cannot cover the entire cost of care. Therefore, for a reasonable survival after retirement the retirees are increasingly looking at creating a sufficient post-retirement income.

Longer span of life

The average span of life in India has gone up because of improved health care facilities and medical advancements. As a result, the length of post-retirement life has gone up. This is encouraging more and more people to plan for a consistent income after retirement that can support them throughout their retired life.

Variety of retirement pension plans

Both in the private and public sectors, there are many different retirement plans and schemes. But essentially, there are four types of retirement plans.

Guaranteed Period Annuity: In these plans, for a minimum number of years, the person is guaranteed a specific income. The nominees will continue to receive that income till the period is completed if the person dies before that period. He or she can continue to receive the income till his death if the person outlives that period.

Life Annuity Plans: Till the time the person continues to live these plans guarantee a person a specific amount of income. The originally invested amount is refunded to the beneficiary’s nominee after the person’s death.

Annuity Certain: Under this retirement pension plan, for a fixed number of years a fixed amount of income is paid. Even if the retiree is still living at the expiry of this period the payments will stop at the end of the period.

Deferred Annuity: Under this plan, to create a corpus fund for a number of years, the person first saves from his income. Thereafter, giving an assured income for the retiree till he or she lives as that fund is used for investing in a specific retirement plan.

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