Pension Plan Or Bundled Package of Insurance Policy to receive as pension

[amit_dly]

I have similar question for pension, Age 33 Yrs, working with software company and looking for 2,40,000 / annum as pension from age of 54 yrs-70 yrs.Question is whether to go for pension plan OR bundle package of insurenace policy that will return the 2,40,000 / annum.My insuranc advisor told me that return from pension is taxable and incase of bundled packakge of insurance policy return won't come under income tax. Please suggest best option to go for.i have received premium quote of 60K till age of 53 yrs and then it will return 2,40,000 /annum.

[LastWarrior]

Your agent is wrong both life insurance and pension plans the final proceed is tax free. Just in pension plan tax free proceed is 1/3 of total amount and for remaining you need to buy annuity.

Life Insurance Proceeds
Section 10(10D) specifies that any sum received under a Life Insurance policy is exempt from tax. Hence maturity proceeds received from an endowment plan, from a term plan with return of premium feature, from installments of a money back plan and from withdrawals of a ULIP are exempted from tax.

Pension Proceeds
Under pension plans, upto 1/3rd of the maturity amount can be commuted and withdrawn in cash. Commuted Pension is treated as tax-free. With the remaining 2/3rd amount an annuity has to be purchased amount. However, one should remember that annuity received from pension plans are not exempted from Tax.

[amit_dly]

thanks a lot, it gave clarity between two options.
Is it better option to go for Life insurance rather than Pension plan?

[LastWarrior]

Is it better option to go for Life insurance rather than Pension plan?
Both the plans have one main objective to build a corpus and give you tax rebate on premium. If you are going for traditional life insurance and pension plan then both will not give you good return in corpus building. So go for ULIP Plans or buy ELSS Mutual Funds.

[bhushansheth]

If you need pension starting age 54, its better to go for bundled policies rather than pure pension plans. Reason being, annuity from pension plan will be taxable.