Last Updated:
Pension ULIPs offer market-linked returns, up to 100% equity allocation, tax-free withdrawals, flexibility, early retirement options, and emergency fund access.
One of the biggest advantages of Pension ULIPs is their ability to help investors grow their funds aggressively while they are working and then offer the flexibility needed post-retirement.
One of the key factors in planning for retirement is ensuring that you have a sufficiently large corpus to sustain yourself without financial dependence on anyone. As life expectancy increases and lifestyles evolve, it has become more important than ever to build a retirement fund that not only meets your needs but also keeps pace with inflation.
To create this corpus, it is essential to start setting aside a portion of your income early and invest in assets that offer growth potential. One such financial instrument that helps in accumulating wealth while ensuring it grows faster than inflation is the Pension ULIP.
What makes ULIPs attractive
Pension ULIPs offer a unique opportunity for market-linked returns, making them an attractive option for retirement planning. Unlike traditional pension plans that provide fixed returns, Pension ULIPs allow policyholders to allocate up to 100% of their investments in equity, thereby maximizing growth potential. This equity exposure helps in beating inflation and building a substantial retirement corpus over time. Moreover, upon retirement, policyholders can withdraw up to 60% of their accumulated corpus tax-free. The remaining 40% is invested in an annuity plan that provides guaranteed income for life, ensuring financial security during the non-working years.
One of the biggest advantages of Pension ULIPs is their ability to help investors grow their funds aggressively while they are working and then offer the flexibility needed post-retirement. This combination ensures that individuals are not only able to accumulate sufficient savings but also have structured access to funds when needed. The dual benefit of wealth accumulation and guaranteed income post retirement makes Pension ULIPs a preferred choice for those looking for a comprehensive retirement solution.
Edge over traditional retirement plans
Apart from helping policyholders beat inflation, Pension ULIPs offer multiple flexibilities compared to traditional retirement plans. Unlike conventional pension schemes that require individuals to wait until the age of 60 to access their funds, Pension ULIPs allow investors to retire early, any time after five years of purchasing the plan. This is particularly beneficial for those who wish to achieve financial independence and step away from work sooner than the conventional retirement age.
Another noteworthy feature is the ability to withdraw up to 25% of the corpus three times during the policy term. This provision can be incredibly useful in case of emergencies such as medical expenses, child education, or home construction. Having the flexibility to access funds without completely disrupting the retirement plan provides much-needed financial security during life’s unexpected events.
Flexibility to choose what suits you
Additionally, as investors approach their retirement years, they can gradually shift their funds from equity-based investments to non-equity funds, thereby reducing exposure to market volatility. This ensures that the corpus accumulated over the years is protected from sudden market downturns, providing stability as the investor transitions into retirement. This flexibility in fund allocation makes Pension ULIPs a more dynamic and responsive option compared to traditional pension plans.
Given the increasing financial uncertainties in today’s world, relying solely on traditional retirement savings may not be sufficient. Pension ULIPs, with their ability to generate higher returns, tax benefits, and customizable investment options, provide a more robust approach to retirement planning. They ensure that individuals not only accumulate enough wealth for their later years but also have the flexibility and security they need to enjoy a worry-free retirement.
Conclusion
As financial planning evolves, it is crucial to choose instruments that align with your long-term goals. Pension ULIPs offer the perfect balance of growth, flexibility, and security, making them an ideal addition to any retirement strategy. By starting early and leveraging the advantages of market-linked investments, individuals can ensure they are well-prepared to maintain their lifestyle and financial independence throughout their retirement years.
It is authored by Vivek Jain, Chief Business Officer, Life Insurance, Policybazaar.com
The views expressed in this article are those of the author and do not represent the stand of this publication.
