Unit Linked Pension Plans - ULPPs
(1) Insurance companies offer unit
linked pension plans, which are market linked products, specifically designed
for investors looking for retirement planning products.
(2) Investors have a choice about the asset
allocation of the fund they invest in. It can be 100% equity, 100% debt, or / some
sort of a mix of the two--depending on their risk profile.
(3) Switching is also permitted in ULPP,
thus allowing investors to change their fund-profile with life cycle changes.
Young investors may start with 100% equity and gradually switch to debt as they
near retirement.
(4) When investors retire, they can
withdraw one third of the accumulated corpus, tax-free. The balance amount must
be used to buy an annuity plan, which will be the source of regular but fully
taxable pension.
(5)
Pension plans are meant to be long term
products. Premature exit from these plans is generally discouraged. Investors
can withdraw 33% of the corpus at maturity.
Courtesy: Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
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