How to Compare Pension Plans?

How to Compare Pension Plans in India?

Comparing Pension Plans is itself a tireding job. Just a decade ago, The Indian market did not have many pension plan schemes. And thus you have to choose from only few options. But now the Indian market is full of Pension Plans from the following reputed private sector companies.

- LIC
- HDFC
- ICICI Pru Life
- Kotak
- And Many others…

And now, finally Indians have a Social Security Scheme just like USA. Recently on 1st May 2009, The Government of India has launched it’s own pension plan (Social Security) for its 89% of work force. The scheme is known as NPS or New Pension Scheme.

NPS is exactly same like Social Security scheme of USA. Thus, now we have several options available for choosing pension plans. Sometimes people get confused that which pension plan to chose. So Here are few basic things that I have learned about comparing the pension plans.

First of all, Ask yourself that, Do you really need a Pension Plan? This is because many financial experts feel that pension plans are nothing but the combination of Mutual Funds & Life Insurance Only. But they are associated with higher charges. So I personally think that rather than going for Pension plans, why not invest in equity diversified mutual funds via SIP and have a separate Term Life Insurance Policy?

So first of all take the wise financial decision that, weather you really want to go for pension plans or not?

Pension Plan = Mutual Fund + Life Insurance

Now, suppose you really want to invest in a pension plan than the next question comes – Weather you want to go for Government Pension Plan (NPS) or for some private Pension Plan?

As a rule, Government schemes are better than the private schemes. Because they are associated with the low fund management and administrative charges. However, You should compare various pension plans’ administrative and fund management charges before taking decision for investing in them.

I Personally don’t need to invest in Pension Plans because I am already investing in Equity Diversified Mutual Funds via SIP and I have a Term Life Insurance Policy. Both of these products fulfill the requirements of a Pension Plan. So I don’t need any Pension Plan.