Hyderabad, March 27th: Pension plans provide a structured approach to retirement planning, allowing individuals to build a substantial corpus over time.

According to an analysis by Policybazaar, investing in market linked pension plans with an assumed annual return of 15% can help in divisible accumulation up to rupees 5.32 crore over 20 years. A major benefit of these plans is the ability to withdraw 60% of the corpus tax-free, irrespective of the investment amount. While the remaining amount is mandatorily invested in annuity to ensure post-retirement income.

Sameep Singh investment product head of Policybazaarexplains,” Market-linked pension plans provide a smart, structured way to build your financial future. By consistently contributing, investors can leverage compounding to accumulate significant wealth over time”.

A pension plan requires regular contributions for a set period. These contributions grow through equity-based investments benefiting from compounding. At maturity, the investor can withdraw a portion of the corpus tax-free, while the rest must be converted into an annuity.

As per Policybazaar calculations, assuming a 15% compounded annual growth rate(CAGR):

● A ₹10,000 monthly investment can grow to ₹ 1.06 crore in 20 years with ₹63.6 lakh available for tax-free withdrawal.
● A ₹50,000 monthly investment can grow to ₹5.32 to croreallowing a ₹3.19 crore tax-free withdrawal.
A higher CAGR results in significant corpus growth over time, making early and consistent investment crucial. Investors can withdraw 60% of the copper tax-free, regardless of the investment amount. The remaining 40% is mandatorily invested in annuity, ensuring lifelong financial security post-retirement.

Returns depend on market performance, making them unpredictable. A 15% CAGR is an assumed figure and actual returns can be lower. Funds remain locked in for the policy term, restricting access to capital in case of emergencies. While annuities provide a stable income, their returns are generally lower than market-linked investments. While 60% of the corpus is tax-free, the annuity income from the remaining 40% is taxable as per the investor’s income tax slab.