Is ULIP a Better Investment Option than the Traditional Pension Plan?

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In order to fulfill the long-term and short-term financial goals of life, it is very important to make proper financial planning. However, while doing financial planning, people often ignore the important aspect of planning for post-retirement. In order to live the golden days of retirement in a relaxed and stress-free way, it is very important for individuals to create a financial cushion for future towards retirement planning. 

In today’s day and age, there are different financial products available in the market, which help in the post-retirement flow of income. Even though there is a wide range of pension plans available in the market, ULIP investment plans are gaining huge popularity as a lucrative option of retirement income. 

For a better understanding of the customers, here we have elaborately discussed how ULIP retirement plans are a better investment option than a traditional pension plan. 

Higher Returns

One may think that a traditional retirement plan is a good way to save and invest, but here is the catch. The traditional retirement the major investment is made in debt funds as it offers a guaranteed benefit as sum assured at the end of the policy term. Since the money is majorly invested in government securities, thus the returns of traditional retirement plans are less. 

On the other hand, ULIP pension plan provides higher returns on the investment, as the amount is invested in equity and equity-related securities. Thus, it provides an opportunity for the individual to accumulate wealth for life after retirement. 

Offers Option of Free Switches 

Apart from providing higher returns on investment, ULIP retirement plans also offer the advantage to choose different fund options for investment. Moreover, it also offers the option of free switches of funds. So, if an individual has a low-risk appetite and does not want to invest in equity market then he/she can choose to invest in debt funds. Furthermore, if the market is performing well and returns on equity are much higher than debt fund, then the individual can make free switches of the fund.  However, before making a fund switch it is very important to know the right time to make a switch. 

Tax Benefit 

Unlike traditional retirement plan, ULIP plan offers a significant tax benefit to the investors. It offers the benefit of EEE (exempt, exempt & exempt). Under the ULIP investment plan, the premium paid towards the policy and the ULIP returns is tax exempted under section 80C and 10(10D) of Income Tax Act 1961. 

Topping it Up 

Another benefit offered by ULIP plans as compared to the traditional retirement plan is that it offers the benefit of top-up. Suppose if an individual buys a ULIP plan with an annual premium of Rs.50,000 at the age of 30 and after few years down the life, if he/she wants to increase the amount of investment adding it to the retirement corpus then they can do it by choosing the option of top-up. As compared to the traditional retirement plan, ULIP plans provide an opportunity to increase the investment amount, thus promising higher returns at the time of retirement. However, the investors will be required to pay the premium allocation charge between 1-3%on the top-premium depending on the policy. 

Offers Flexibility

The ULIP investment plans offer flexibility to the policyholders. The insurance holder can withdraw the money anytime according to their suitability. Moreover, the insured can apply for the maturity proceeds as per their own choices, however, pension plan has restricted option. 

Wrapping it Up!

As old age can bring a lot of complications, it is very important for every individual to be fully prepared to deal with any type of eventualities. After going through the above-mentioned points, it can be clearly concluded that ULIP plans along with the benefit of insurance coverage are a much better option of investment for retired pensioners as compared to the traditional retirement plan. With various benefits offered by ULIP plans, it is very important to start investing in ULIPs as early as possible so that one can accumulate maximum corpus to fulfill the future financial goals.  

 

 

Disclaimer: This content does not necessarily represent the views of IWB.

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