Retirement Pension Plans in India

Pension plan retirement plan ensures financial security for your future. Know the importance, types, benefits, eligibility criteria, how to choose, and how to buy.
Explore plans
Check Life Insurance Policies
Get Quote
3 min
19-March-2025

Planning for retirement is essential to ensure financial security in your later years. With increasing life expectancy and rising costs, a well-structured pension plan can help you maintain your lifestyle post-retirement. In India, pension and retirement plans provide a steady income source after you stop working. They also offer tax benefits and financial stability for your dependents. Understanding the different pension plans available can help you make an informed decision.

What is a pension plan or retirement plan?

A pension plan, also known as a retirement plan, is a financial product that helps you build a corpus for your post-retirement years. These plans let you save regularly during your working life so you can enjoy a stress-free retirement. The most suitable retirement plans combine investment and insurance benefits, offering financial stability and peace of mind. They ensure that you continue to receive income even when you’re no longer working.

Why do I need to plan for my retirement?

Planning for retirement isn't just about saving money—it's about securing peace of mind and enjoying your golden years without financial stress. Whether you're in your 30s or 50s, thinking ahead with the right pension plan or retirement plan gives you freedom, security, and confidence in the future.

Here’s why retirement planning matters:

  • No steady income after retirement: Once you stop working, your salary stops too—but your expenses don’t. A solid pension plan retirement plan ensures you have income to meet your needs.

  • Healthcare costs will rise: With age comes medical expenses. Planning early helps you manage these without breaking your savings.

  • Maintain your current lifestyle: A good retirement plan helps you live comfortably without compromising on the things you enjoy—even after retirement.

Importance of pension and retirement plans

Planning for retirement isn’t just smart—it’s essential. A reliable pension plan or retirement plan ensures peace of mind, financial independence, and long-term security.

Why pension and retirement plans matter:

  • Ensures financial independence in old age: You won't need to rely on your children or others for money. A pension plan offers steady income to cover daily expenses post-retirement.

  • Protects against inflation: With prices rising over time, your savings might not be enough. A good pension plan gives returns that grow, helping you keep up with inflation.

  • Manages rising healthcare costs: Medical bills tend to increase with age. A structured retirement plan helps you prepare for unexpected health expenses without stress.

  • Maintains your current lifestyle: Whether it’s travel, hobbies, or just comfort, these plans ensure you continue enjoying life after retiring.

  • Offers life cover for dependents: Many retirement pension plans come with insurance benefits, offering financial protection to your family in case of your untimely death.

  • Provides tax benefits: Investing in a pension plan can give you tax benefits under Section 80CCC and Section 10(10A), offering both savings and long-term benefits.

Types of pension plans available

There are different types of pension plans available in India, each catering to various financial needs. Understanding these options can help you choose the best plan for your retirement.

Types of pension plans

Description

National Pension System (NPS)

A government-backed scheme that allows individuals to contribute regularly towards their retirement savings. It provides market-linked returns and tax benefits.

Employee Provident Fund (EPF)

A mandatory savings scheme for salaried employees where both employer and employee contribute a percentage of the salary.

Public Provident Fund (PPF)

A long-term savings scheme with a fixed interest rate, offering tax-free returns.

Atal Pension Yojana (APY)

A government initiative providing guaranteed pension to unorganised sector workers, with contributions based on age and income.

Annuity Plans

These plans, offered by insurance companies, provide regular income in exchange for a lump sum investment. Some annuity options are combined with term insurance plans, offering life coverage along with retirement income.

Unit-Linked Pension Plans (ULPPs)

Market-linked plans that provide investment growth along with pension benefits.

Traditional pension plans

Insurance-based plans offering guaranteed income post-retirement.


Each of these plans has different benefits, investment modes, and returns, making it crucial to choose one that aligns with your financial goals.

How much do I need to save for retirement?

There’s no one-size-fits-all answer here. Your retirement savings should be based on your lifestyle goals, expected future expenses, inflation, and how long you expect to live post-retirement. The earlier you start, the less pressure there is later.

Here’s how to estimate your savings needs:

  • Define your retirement age and lifestyle goals: Think about when you want to retire and how you want to live—modestly or luxuriously. This impacts how much your pension retirement plan should provide.

  • Calculate monthly expenses post-retirement: Include essentials, hobbies, travel, and unexpected costs. Use a pension plan retirement plan calculator to project future needs.

  • Adjust for inflation and medical emergencies: Today’s Rs. 50,000/month might not be enough 20 years from now. Factor in inflation and increasing healthcare costs.

  • Consider life expectancy and spouse coverage: Plan for at least 20–30 years post-retirement, including your spouse’s needs under your retirement pension plan.

How does a retirement pension plan work?

A pension plan retirement plan works by helping you accumulate a fund through regular contributions or premiums during your working years. At retirement, this fund is converted into a steady income stream, often as an annuity. It ensures financial security and supports your lifestyle after you stop working, giving you peace of mind to enjoy your golden years.

Benefits of investing in a pension plan

Investing in a pension plan offers multiple benefits, ensuring financial security and stability. Some key benefits include:

  • Regular income after retirement – Pension plans provide a steady income stream, ensuring you can meet expenses without financial worries.

  • Financial independence – With a pension plan, you do not have to depend on family members for financial support.

  • Wealth accumulation – Over time, pension plans help accumulate a corpus, ensuring financial security.

  • Inflation protection – Returns from pension plans help combat rising costs and maintain your purchasing power.

  • Life insurance coverage – Many pension plans come with life insurance benefits, ensuring financial support for your dependents.

  • Flexibility in investment – Several pension plans allow you to choose between fixed and market-linked returns.

  • Tax advantages – Contributions to pension plans qualify for tax deductions, helping you save more.

Key features of retirement pension plan

Before choosing a pension retirement plan, it’s important to understand the features that make it effective and future-ready.

Look for these essential features:

  • Regular income stream: These plans provide a fixed monthly income post-retirement, giving you stability.

  • Annuity options: Choose between lifetime annuity, joint-life annuity, or return of purchase price, depending on your needs.

  • Tax benefits: Many pension retirement plans offer tax deductions under Section 80C and 10(10D).

  • Flexibility in contributions: You can pay premiums monthly, quarterly, or annually—based on your income flow and preference.

Eligibility criteria to buy pension plan for retirement

  • Age: Most pension retirement plans are available to individuals aged 18 to 65, though this can vary by insurer.
  • Stable income: A steady income helps you contribute regularly to your plan.
  • Medical requirements: Some plans may ask for a basic medical check-up or health declaration.
  • Minimum investment: A specific minimum premium or contribution may be required.

These criteria help ensure you qualify for a pension retirement plan that supports your post-retirement goals.

How to choose the right retirement plan?

Choosing the right retirement plan requires careful consideration of various factors. Here are some key pointers:

  • Assess your financial goals – Determine how much money you will need after retirement based on your lifestyle, healthcare needs, and inflation.
  • Start early – The earlier you invest, the more you benefit from compounding returns.
  • Compare different plans – Analyse features, benefits, and returns offered by various pension schemes before deciding.
  • Consider risk tolerance – If you prefer stability, traditional pension plans or EPF/PPF are ideal. If you can handle market fluctuations, NPS or ULPPs may be better.
  • Look at tax benefits – Check which plans offer maximum tax deductions to reduce taxable income.
  • Check liquidity options – Some pension plans allow partial withdrawals, while others lock funds until retirement.
  • Review annuity options – Ensure the plan provides an annuity that suits your post-retirement income needs.

Pro Tip

Secure your family’s future against life’s uncertainties with our reliable term plans starting at just Rs. 15/day* for a life cover of Rs. 1 crore.

life insurance

How to buy a retirement plan online in 2025?

Buying a retirement plan online in 2025 is easier than ever, thanks to digital tools and simple processes. With the most suitable retirement pension plan, you can compare options, review features, and make an informed decision from the comfort of your home. The following steps guide you through the process seamlessly.

  • Research options: Compare the most suitable retirement pension plan providers using online tools.
  • Check eligibility: Make sure you meet the insurer’s age and income criteria.
  • Select plan features: Choose a plan with desired benefits and add-ons.
  • Apply and pay: Fill in the application, submit documents, and make the premium payment online.

Tax benefits of retirement planning

Retirement planning offers significant tax benefits, making it a smart financial decision. Some of the tax advantages include:

 

  • Deductions under Section 80CCC – Contributions to pension plans qualify for deductions up to Rs. 1.5 lakh per year.
  • Exemptions under Section 10(10A) – A portion of the pension received as a lump sum is tax-free.
  • Tax benefits on NPS – Additional deductions up to Rs. 50,000 are available under Section 80CCD(1B).
  • PPF and EPF exemptions – The interest earned and maturity amount from these schemes are tax-free.
  • Tax-free withdrawals – Some pension plans offer partial tax-free withdrawals after a certain period.
  • Reduced taxable income – Contributions to retirement plans reduce taxable income, lowering tax liability.

Factors to consider while buying retirement pension plan

Choosing the right retirement pension plan is more than just picking a policy—it’s about aligning with your long-term goals, risk appetite, and future needs.

Keep these key factors in mind:

  • Start age and retirement age: The earlier you start your pension plan retirement plan, the more your money grows through compounding.

  • Guaranteed vs. market-linked returns: Some plans offer fixed returns; others are linked to market performance. Choose based on your risk tolerance.

  • Annuity payout options: Look into monthly, quarterly, or annual payouts—and whether the plan covers your spouse after your death.

  • Inflation protection: Opt for plans that offer increasing annuity payouts to match rising costs of living.

  • Tax implications: Understand the tax benefits on premiums paid and maturity amount under your chosen retirement pension plan.

When is the right time to invest in a retirement pension plan?

The best time to start a pension retirement plan is now. The earlier you begin, the smaller your monthly investments need to be—and the greater your returns. Starting in your 20s or 30s gives your money more time to grow through compounding. Even if you’re in your 40s or 50s, it’s never too late—just tailor your investment and annuity strategy to fit your timeline and goals. Begin today for a secure, stress-free tomorrow.

 

Conclusion

A well-planned retirement ensures financial stability, independence, and peace of mind. With various pension plans available in India, choosing the right one depends on your financial goals, risk appetite, and long-term needs. Investing early in a pension plan helps maximise benefits and ensures a comfortable post-retirement life. Additionally, tax benefits make retirement planning a financially rewarding decision. By making informed choices, you can secure a financially independent future and enjoy your golden years without worries.

Related articles

Child plans

What is term insurance

ULIP plans

Saving plans

Term insurance senior citizens

Term life insurance benefits

Frequently asked questions

What is the difference between a pension plan and a retirement plan?
A pension plan provides a fixed, regular income after retirement, often funded by employers or insurance companies. A retirement plan includes various savings and investment options, such as NPS, PPF, or mutual funds, allowing individuals to build their corpus for post-retirement financial security. Pension plans are structured, while retirement plans offer flexibility.

How can I calculate the amount needed for my retirement?
To calculate your retirement corpus, estimate monthly expenses, factor in inflation (6-7%), and determine the investment period. Use the future value formula or online calculators. Consider expected returns (8-10%) from investments like NPS or mutual funds. Ensure funds last 20-30 years post-retirement for a financially secure future.

What happens if I stop contributing to my retirement plan?
If you stop contributions, your corpus growth slows due to missed compounding benefits. Some plans, like NPS or PPF, may restrict withdrawals until maturity. In employer-backed pensions, contributions cease, but existing funds remain invested. It’s best to restart investing soon to avoid financial shortfalls during retirement.

What type of retirement plan should I consider?

The most suitable retirement plan depends on your goals and needs. Popular options include annuity-based plans, mutual fund-based pension plans, or a mix of both. Choose one that offers flexibility and inflation protection.

Which pension scheme is most suitable for retirees?

The most suitable retirement pension plan varies by individual. National Pension Scheme (NPS), Employee Provident Fund (EPF), and private annuity plans are popular choices, depending on your financial needs and risk appetite.

Can you explain the 7% rule in retirement planning?

The 7% rule suggests withdrawing around 7% of your retirement savings annually, aiming to maintain a steady income while preserving capital. It’s a general guideline, and your personal situation may require adjustments.

At what age can I start a retirement plan?

You can start a retirement plan as early as 18 years old. The earlier you begin, the more time your money gets to grow, helping you build a strong retirement corpus through compounding.

Do pension plans have a lock-in period?

Yes, most pension plans come with a lock-in period of 5 to 10 years, depending on the policy type. This ensures long-term savings and discourages early withdrawals that can affect your retirement goals.

What are the annuity options available in pension plans?

Pension plans offer various annuity options like lifetime income, joint-life annuity with spouse, or return of purchase price. You can choose based on your income needs and whether you want to secure your spouse’s future too.

Show More Show Less

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.

Explore and apply for co-branded credit cards online.

Invest in fixed deposits and mutual funds on the app.

Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.

Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.

Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on No Cost EMIs.

Shop from over 100+ brand partners that offer a diverse range of products and services.

Use specialised tools like EMI calculators, SIP Calculators

Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Company Limited, Star Health & Allied Insurance Company Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited, Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limited under the IRDAI composite registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure & policy wordings carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also distributor of other third-party products from Assistance service providers such as CPP Assistance Services Private Limited, Bajaj Finserv Health Limited. etc. All product information such as premium, benefits, exclusions, value added services etc. are authentic and solely based on the information received from the respective Insurance company or the respective Assistance provider company.

Note - While we have made all the efforts and taken utmost care in gathering precise information about the products, features, benefits etc. However, BFL cannot be held liable for any direct or indirect damage/loss. We request our customers to conduct their research about these products and refer to the respective products sales brochure and policy/membership wordings before concluding sales.