Selecting the right option
At this stage, keep your options open on an annuity distribution cycle and service providers. Once pension options open up in India, we might see a variety of more suitable options available.

But till then, bear in mind the following:
~ Lock-in
Your pension plan should not have any flexibility or liquidity options. Avoid withdrawal or liquidity options during the contribution (wealth creation) period. The corpus you generate must be available for an immediate annuity option from the time you retire.

~ Cost
Unit Linked Insurance Plans, popularly called ULIPs, are a good bet for the longer term. But when you choose unit-linked plans you need to look into the overall cost structure, which impairs the total return in the long-term as well as the performance of the fund.

~ Tax benefits
Understand the tax benefits of any pension plan. Your accumulated corpus must be tax free; only annuities at the time of receipt should be taxed. You will have the flexibility to frame the annuity cycle when you retire, so you can work it out at the time of maturity, depending on the prevailing tax rates. Making any guesses about the tax structure about that time would be hazardous.

~ Focus
Try never to look at additional benefits. Each of these will cost you and, thus, reduce maturity benefits. Any pension plan should only generate maximum retirement corpus.

Here are some smart options that you can choose from.

Tips such as these can help you enjoy retirement.

Photograph: Andrew Wong/Getty Images

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e-mail: B Sreenivasan

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