Guaranteed Pension Plan for your Retirement

What is a Guaranteed Pension Plan?

Features and Benefits of Guaranteed Pension Plan

1. Death Benefit

The guaranteed death benefit is paid to the nominee in case of the policyholder's unfortunate demise during the policy tenure. This death benefit is the corpus built from the paid premiums with its interest.

2. Guaranteed Additions

Some insurers provide assured regular additions at a certain percentage of the sum assured. For example, an insurer might provide guaranteed additions at 3% of the sum assured on every completed policy year.

3. Vesting Addition

Vesting Addition, an additional enhancement to your corpus, is a percentage of the sum assured payable as a lump sum at the time of vesting.

4. Premium Payment Term and Policy Term

Most plans provide a choice of premium payment term of 5, 7 or 10 years and a policy term ranging from 10 to 20 years. You can choose these terms as per your requirements and investment objectives.

Having a clearly defined payment and policy term as per choice makes it easier for the policyholder to plan their financial commitments effectively.

5. Income Age

You can choose your vesting age as per your life goals and requirements. Accordingly, you can start receiving the income immediately or after a certain period.

6. Surrender Value

Though it's always advisable to continue your policy to reap the maximum benefits, you always have the option to surrender it once it has acquired a surrender value.

The regular pay policies attain a surrender value after two years of premiums have been paid, and the single premium policies acquire a surrender value immediately after the first premium payment.

Besides, the surrender benefit offers liquidity in times of need.

7. Tax Benefit

The premium paid towards the guaranteed pension plan is eligible for tax deduction under Section 80C and the returns received are tax-free under Section 10(10D). However, the tax benefits are as per the prevailing tax laws.  

8. Annuity

The guaranteed pension plans provide a steady income stream through annuity payments, providing a reliable source of funds during retirement.

The annuity can be a single life or a joint life. In a single-life annuity, the annuity is paid to the policyholder as long as the annuitant/policyholder is alive. 

For a joint life annuity, the secondary annuitant receives the annuity benefit after the primary annuitant's death, and the annuity is paid till the death of the last annuitant.

9. Top Ups

At any point, if you feel to increase your retirement corpus, most plans offer a top-up option wherein you can increase your premium amount and thus the retirement income accordingly.

10. Lapsation

In case of non-payment of the premium due within the grace period, the policy lapses if it has not acquired a surrender value and no benefits are paid.

11. Grace Period

If you miss paying your premium on time, you are provided a certain time extension during which the policy stays in force with risk cover. This extended period is known as the grace period.

It is 30 days in case of yearly, half-yearly and quarterly premium frequencies and 15 days for monthly premium frequency for guaranteed pension plans.

12. Paid Up Value

If, due to any reason, you stop paying your premium after the policy has acquired a surrender value, the policy is made paid-up at the end of the grace period. The benefits on a paid-up policy are reduced as per the premiums paid.

How Guaranteed Pension Plans Work?

Factors to Consider Before Choosing the Right Pension Plan

FAQs About Guaranteed Pension Plan

Is the Income from Guaranteed Pension Plan Taxable?

The income that comes in the form of annuity is taxable in pension plans.

Can I Withdraw my Money Before Retirement from a Pension Plan?


Since pension plans are designed to build a retirement corpus, it is never recommended to prematurely withdraw money from a pension plan.

However, most guaranteed pension plans provide an option of partial surrender or complete surrender, but in such a case, your returns are affected. 

Can I Use a Guaranteed Pension Plan as Collateral for Loan?

Yes, a guaranteed pension plan can be used as collateral for a loan once it has acquired a surrender value.