HARIOM GARG

A25604623028
BCOM HONS1

TERM PAPER
PERSONAL FINANCE
 INTRODUCTION
Life insurance companies offer this investment plan to help develop. A pension
scheme is an insurance scheme where employers have to make contributions to
a fund for the future benefits of their employees. A defined benefit plan
provides either a one-time pension payment or a fixed monthly payment over
the life of the plan. To avoid financial gaps in the post-employment years, the
plan provides a defined and consistent pension. A defined benefit arrangement
provides a lump sum payment at retirement or a fixed monthly payment for the
rest of your life.

How do Pension Plans work for an Individual?

Assume you are 35 years old and intend to retire at 60. You project that after
retirement, you will require ₹ 45,000/-per a month to maintain your standard of
living.
As a result, you will have to accumulate a fund that produces ₹ 45,000/-per
month of income within the 25 years that follow. The function of a pension plan
is to create this fund: Your capital increases through investments when you
make regular fixed-sum contributions.
You are permitted to take out a predetermined portion of the funds when you
retire. During the years of your retirement, the remaining fund provides you
with a fixed, consistent income.

Types of Pension Plans

1. Deferred Annuity
With a deferred annuity pension plan, policyholders can pay a single or
recurring premium to receive annuities at a later time. They can accumulate a
sizeable sum of money throughout the policy period to be paid out as a pension.
With this kind of pension plan, tax benefits are also available to you.
2. Immediate Annuity
With an immediate annuity pension plan, you make a lump sum payment and start
receiving annuities right away. You have the freedom to select the amount to make
investments and from a variety of annuity options. Should something unfavorable
happen, the nominee is qualified to get the benefits.
3. Annuity Certain/Guaranteed Period Annuity

The policyholder in this kind of pension plan gets an annual payout for a
predetermined number of years. They are free to select the payment schedule
that works best for them. In the event of the insured's passing, the nominee
under this kind of pension plan is paid.

4. Whole life ULIPs (Unit Linked Insurance Plan)

As the name signifies, the policyholder can make withdrawals in part and
receive tax-free income throughout retirement, and the invested money remains
for the policyholder's whole lifetime. Anytime more withdrawals are required,
they are permitted.

5. Pension Plans with Life Cover

The pension plans have both an investment component and life insurance. It
indicates that in the event of the policyholder's passing, the surviving family
members will get a lump sum payout. It is important to remember, though, that
with this kind of pension plan, the insurance benefit amount might not be very
high.

Advantages of Pension Plans

Opportunity to diversify across asset classes:-

The majority of pension funds allow investors to select the asset class in which
they want to have the greatest exposure. Investors have the option of selecting
between pure debt, pure equity, or a combination of both.

Benefits of long-term investing:-

Your investments may profit from long-term investing because these schemes
make long-term investments. Pension plans guarantee that you have a healthy
corpus by the moment you retire and generate an annuity that will continue to
pay you a regular income after you retire.
Multiple options for payment:-

Pension plans generally offer investors a lot of flexibility when it comes to

payouts. Investors can invest a lump sum and receive immediate annuity
payments or opt for a deferred annuity plan that allows their corpus to earn
more interest until the payments begin.

Can provide the benefits of a life-insurance cover:-

certain pension plans also offer life insurance where a lump sum payment is
made to a family member/representative in the event of the insured's death.
Access to emergency cash - Investors can make certain changes to their
pension policy and receive cash in an emergency. These crises are predestined.

ATAL PENSION YOJANA

Atal Pension Yojana (APY) pension scheme for citizens of India is focused on
the unorganized sector workers. Under the APY, guaranteed minimum pension
depending on the subscribers' payments, 1,000, 2,000, 3,000, 4,000, or 5,000/-
per month will be awarded at the age of sixty.

TARGET SEGMENT :-
The scheme was launched with the PURPOSE of creating a universal social
security scheme for all Indians, especially the poor, disadvantaged and
unorganized sector workers.

Eligibility for Atal Pension Yojana:-

 The Atal Pension Yojana (APY) is available to anyone who are not
enrolled in any legally mandated social security programs.
 The program is open to everyone with a bank account who is between the
ages of 18 and 40.
 He or she will need to undertake Aadhaar authentication and provide
evidence of possession in addition to their Aadhaar number.
 It is recommended that the subscriber register their Aadhaar number in
both their savings and APY pension accounts.
 The government co-contribution credit and the deduction of contribution
installments depend on the Aadhar number being provided.

BENFITS OF APY:-
 Under the Atal Pension Yojana, the government would guarantee the
minimum pension benefit insofar as the government would cover any
shortfall in pension contributions if actual realized returns over the
contribution period were lower than assumed returns for the minimum
guaranteed pension. On the other hand, subscribers will get greater plan
benefits if actual earnings on their pension contributions over the course
of the contribution term exceed the expected returns for the minimum
guaranteed pension. This excess will be credited to their account.

 The spouse is entitled to receive the same pension benefits upon the
subscriber's death.

 The indicative pension wealth will be returned to the nominees after the
death of a spouse.
 Similar to the National Pension System (NPS), subscriptions to the Atal
Pension Yojana (APY) are eligible for tax advantages.
 NEW PENSION SCHEME
(NATIONAL PENSION SCHEME )
Under its OM No.F.No.1)T)(2)/2003/TA/19 dt.14.1.2004 & 4.2.04, the Ministry
of Finance, Department of Expenditure, Govt. of India, has replaced the current
Defined Benefit Pension System with a New Defined Contribution Pension
Scheme. Commencing on 1.1.2004, the New Pension Scheme is available to all
newly hired Central Government employees, with the exception of Armed
Forces who join the government on or after 1.1.2004. The Indian government
introduced the National Pension Scheme (NPS) in 2004 as a defined
contribution, voluntary retirement savings plan. It is available to all Indian
nationals between the ages of 18 and 70 and is governed by a body called the
Pension Fund Regulatory and Development Authority (PFRDA).

TYPES OF NPS ACCOUNT

NPS accounts come in two varieties: Tier 1 and Tier 2.

The principal account, a pension account with limitations on withdrawals and

use of accrued corpus. Only Tier I accounts are eligible for all of NPS's tax
incentives. All investors must have a primary account, or Tier 1, which has a
lock-in term that lasts until they turn 60.

The PFRDA permits a Tier II account, where users with currently present Tier I
accounts are able to contribute and withdraw funds as needed, to add some
flexibility to the plan. The NPS Tier II investing account has features like to
those of a mutual fund, but it also has excellent returns, no exit cost, and no
commissions. Under certain circumstances, government employees can benefit
from tax advantages through the Tier 2 NPS account.
Eligibility
 When submitting an application to a Point of Presence (POP) or Point of
Presence–Service Provider–Authorized branches of POP for NPS, the
subscriber must be between the ages of 18 and 70.

 The Know Your Customer (KYC) guidelines as outlined in the subscriber

application must be followed by the subscribers.

 Undischarged bankrupt people and mentally ill people shouldn't be

allowed.

 An individual must be an Indian citizen.

 A non-resident can set up an account, but if the non-resident's citizenship

changes, the account will be canceled.

Key Changes to the NPS Rules in 2023

Raising the maximum age to join the NPS: The current maximum age to join
the NPS is 65 years old. But starting in 2023, this restriction will rise to 70
years. As a result, people will be able to begin investing in NPS afterwards
later in life and still profit from the program.

Elimination of the 40% annuity requirement: At the moment, subscribers

must utilize 40% of their total corpus to buy an annuity. A financial
instrument called an annuity offers a lifelong, consistent income source.
Nevertheless, this regulation will be eliminated as of 2023. When it comes
time to retire, subscribers will be able to take their full corpus out or spend
some of it to buy an annuity.

Minuscule contribution requirement reduction: At present, NPS requires a

minimum commitment of ₹ 500 per month. But starting in 2023, only ₹ 100
will be needed to meet this criteria. As a result, those who might not have
big quantities of money to invest will find the system more accessible.
 BENEFITS OF NPS
 It is transparent: the nps is an efficient and transparent system that
allows employees to track the daily value of their pension payments,
which are invested in pension fund schemes.

 The subscriber just has to get a permanent retirement account number

and create an account with their nodal office to begin the process.

 It is portable: every employee has a distinct pran that is identifiable by

their unique number and stays the same even if they are transferred to
a different office.

 It is regulated: the pension fund regulatory and development authority

(opens in a new window) oversees nps, and the nps trust (opens in a
new window) regularly monitors and evaluates the fund managers'
performance. Transparent investing standards are also in place.

 Savings: the expenses related to investing in nps will be decreased as a

result of the lowering of the minimum contribution requirement. This
will increase the scheme's appeal to a larger group of people.

REVERSE MORTAGE
Homeowners can obtain loans for larger sums of money via reverse mortgages,
which are similar to ordinary mortgages and use the value of the homes as
collateral. Identical to a conventional mortgage, a reverse mortgage loan allows
you to keep title to your house. In contrast to a standard mortgage, borrowers
are exempt from making monthly mortgage payments when they have a reverse
mortgage loan. After the loan is returned and the borrower leaves the house.
Each month, fees and interest are assipited to the loan amount. A reverse
mortgage loan owner is required to pay property taxes and homeowners
insurance, use their home as their primary residence, maintain their home in
excellent shape, and complete additional requirements.

PURPOSE:-
 Loan to cover emergency and medical costs for family upkeep
 To augment a pension or other source of income
 Meeting any other genuine need

Eligibility:-
 Seniors over 60, including former employees of our bank. If one of the
married partners is older than 60, they may apply for financial aid as joint
borrowers.
 They must be the owners of a primary residential home or apartment in
India that they have personally bought, have a clear and indisputable title,
and are self-occupied.
 The house or apartment must be in India, be free from encumbrances, and
be marketable. However, inherited residential property may also be
approved if it becomes vested via a divorce or because the surviving
spouse is the only legitimate heir, so long as the property's title is
unencumbered.
 The property should have a residual life of more than 20 years.

BENEFITS
Versatile: You may use the RML payouts to pay for trips, medical
expenditures, and regular household needs. There are no limitations on the
final usage other than the one-time payout.
Benefits to taxes: The Income Tax Act of 1961's Section 10(43) states that
the RML payouts are not to be considered income. Borrowers on reverse
mortgage loans are therefore excluded from paying taxes. Additionally, there
are tax deductions available for the RML amount spent on house
improvements.
Repayment of the loan is not required: In elderly age, paying off debt is
almost impossible. In the event of the borrower's passing, the bank may
utilize RML to recoup the loan balance by selling the property. Thus, you are
exempt from repaying the debt.