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10 Key Terms Regarding Retirement Plans That You Should Know


Nov 2, 2021
life insurance plan


Your post-retirement period should be one that is enjoyable, relaxed, and free from stress. You shouldn’t have to worry about finances at an age where you ought to bask in the glory of your past success. And, to do so, you must build a retirement fund right from an early age. If you have rightly decided that you will take the steps to start a retirement plan, then you may need to know certain terms associated with it. Let us look at 10 key terms related to retirement planning that you should know.

1) Pension Plan

A pension plan is an investment plan designed to provide you with a regular income or pension after you retire. You can purchase the policy, pay your premium and after you attain 50 years of age, you’ll either start receiving your pension for a fixed duration of years or for the remainder of your life depending on the plan.

2) Premium

The premium is the amount of money that you invest towards your retirement plan. Just like in a life insurance plan, you need to pay the premium to keep the policy in effect. The premium can either be paid as a single, lump sum payment or as regular premiums paid at monthly, quarterly, bi-annual or annual intervals.

3) Beneficiary or Nominee

The beneficiary is the person who receives the death benefit amount in case the policyholder passes away. When you purchase life insurance or any plan that offers life cover, you must mention the beneficiary so that there are no issues at the time of claim.

4) Riders

Riders are additional benefits over and above your pension plan that you can avail for an extra premium. For example, an accidental death benefit rider can be purchased which can entitle your family to an additional assured sum in case of death by accident.

5) Investing Period or Accumulation Period

This is the period that you’re invested in in your pension plan. For example, if you’re investing Rs. 10,000 every month for 30 years, then 30 years is your investing or accumulation period.

6) Vesting age

The vesting age is the age when you start receiving your income from a pension or retirement plan. The minimum vesting age is usually 50 to 55 years for most pension or retirement plans.

7) Fund Value

The fund value is the total value of your entire investment at the end of the investment period, including returns. Based on the particular pension plan, you may be paid a predetermined fund value, or a fund value based on the equity performance if your pension plan invested in equity.

8) Maturity Benefit

The maturity benefit is the total amount of money that you stand to receive at the end of your retirement plan. In equity linked pension plans, you either get the fund value or the guaranteed maturity benefit based on which one is higher.

9) Loyalty Benefit

The insurance company pays you a loyalty bonus if you remain invested in the plan for the entire duration of the investing period. If you were regular with your premiums, then you receive the loyalty benefit, which is the monetary surplus earned by the company and shared among its policy holders.

10) Death Benefit

The death benefit is the amount payable to the beneficiary or nominee in case the policyholder passes away during the policy term. This can be for a pure life insurance policy, a pension plan, an annuity plan, a unit linked insurance scheme etc. All pension plans usually have a death benefit. The death benefit may be paid as a lump sum payment or as regular income to the nominee.

So, if you’re planning to start a retirement plan, make sure you know the terms so that you better understand the terms of the plan and make an informed choice.

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