Are Pension Plans in India Worth?

Recently a reader has asked me a question – Are Pension Plans in India Worth?

Well, there are several reputed companies like LIC, SBI, HDFC & ICICI which are offering this financial product. They are giving many advantages to the customers. Over all these products are good. But I personally don’t like to invest in Pension Plans.

Let me give you the detailed description that, Why I don’t like to invest in any Pension Plan India?

Well, First of all, Why we need Pension Plan? Well, Pension Plan is for 3 basic needs.

01) Growth of Money (To Build sufficient Retirement Corpus)
02) Insurance Cover &
03) Tax Benefits

anyone invest in Pension Plan mainly for the above 3 reason. Now, How Pension Plans Grow your Money? Well, Pension Plans grow your money exactly like Mutual Funds. Means they have their own fund managers which invest your money in the stock market exactly same like mutual funds.

So it means that,

Pension Plan = Mutual Funds + Life Insurance Policy + Tax Saving Products

In other words, Pension Plans are nothing but the combination of the above 3 products and nothing else. So now the question comes is that, weather to own a Pension Plan Policy or hold the above 3 products separately?

Well, In my opinion rather than going for Pension Plans, one should buy Mutual Funds, Term Life Insurance Policy & Tax Saving Products (PPF, Savings Schemes) separately. Because buying 3 financial products separately will save you a lot of costs.

Pension Plans are nothing but just the opaque mutual funds. They will charge you anywhere between 10-20% of various administrative charges and after that whatever remains, they will invest it in the equity.

While on the other hand, Mutual Funds have ZERO entry cost and low fund management charge & buying term life insurance policy is cost effective.

So I think Pension Plans in India are not Worth. One should go for Mutual Funds, Term Life Insurance & Tax Saving Products separately.