Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) are two of the most popular retirement planning tools in India. As both the schemes are government-backed, they are risk-free and offer guaranteed returns.
While EPF contribution of 12% from the basic salary is mandatory for employees from the organized sector, anyone can open an EPF account and contribute up to Rs. 1.5 lakhs in a year. Apart from these government-backed savings schemes, private insurers in the country also offer retirement or pension plans that are quickly turning into a preferred choice over traditional options.
Here are some of the top reasons that make private retirement plans a better choice than EPF and PPF-
- Higher Life Insurance Cover
Most of the retirement plans offered by top insurers in the country come with a life insurance cover. In case of the policyholder’s death during the policy tenure, the nominee will receive the death cover. The death benefit can offer financial security to your spouse and other members of your family.
While PPF does not come with any insurance benefit, employees who contribute to EPF are eligible for Rs.7 lakhs death benefit from the EPFO (EPF Organization). But as the cost of living is consistently rising, the death benefit of Rs. 7 lakhs might not provide adequate financial safety to your family. In comparison, retirement plans offer a significantly higher death benefit.
- Immediate and Deferred Annuity
With both EPF and PPF, you need to keep contributing throughout your working life in order to build a decent retirement corpus. Both the schemes have stringent rules regarding withdrawals and premature withdrawals. But with retirement plans, you get the option to choose between immediate and deferred annuity.
With immediate annuity plans, you can invest a lump sum amount and start receiving pensions immediately. With a deferred annuity, you can invest a fixed amount regularly from an early age to start receiving regular pensions in the future. The vesting age or the age after which you can begin to receive pensions ranges between 40 to 70 years.
- Additions, Bonuses, and Assured Benefits
When you contribute to EPF or PPF, your investment earns a fixed rate of interest. The government reviews the interest rate every year. Apart from the interest income, the schemes do not offer any additional benefits.
But leading retirement plans from top insurers offer guaranteed additions, bonuses, and assured benefits to help you grow your savings. All of these additional benefits are paid to the policyholder on vesting to help them live the retirement of their dreams. In case of the policyholder’s demise, the nominee receives these benefits.
- Option to Choose the Asset Class
While the EPFO invests some portion of the EPF contributions in Exchange Traded Funds (ETFs), contributors do not have the option to choose their preferred asset class. The same is true for PPF, where the contributions are invested in special securities of the state and central government.
With most retirement plans, policyholders get the option to choose classes of assets as per their investment objective, age, and risk appetite. The majority of the premiums are invested in the asset class chosen by the policyholder.
Building a Financially Secure Retirement with a Retirement Plan
Compared to the government, private insurers have more flexibility to build retirement products that better meet the needs and expectations of the customers. The extensive range of benefits these plans offer provides you with an excellent opportunity to build the retirement of your dreams where you can be financially independent and enjoy things you love.
Look for a reputed insurer to know more about the features and benefits of the pension plans they offer. Insurance providers also provide complete assistance in helping customers choose the right product.
