A pension plan is not just a tax-saving product. It is a structure that converts your working income into a predictable retirement income, even when markets are volatile and your monthly expenses keep rising. If you are unsure how much you need, a retirement calculator helps you translate today’s lifestyle into a monthly number for the future, and then you can pick a pension scheme that matches that gap.**
Defined Benefit pension plans
A Defined Benefit plan promises you a fixed pension amount or a formula-based payout after retirement. Your employer or the plan sponsor takes the investment risk, and you get a steady income linked to salary and years of service. This is the “classic pension” model, now less common in private companies but still relevant in some government or legacy setups.
Defined Contribution pension plans
In Defined Contribution plans, you and/or your employer contribute regularly, and your retirement corpus depends on investment performance. Examples include provident fund-style retirement savings and market-linked retirement products.
Government-backed pension schemes
Government pension schemes are designed to provide broad retirement coverage and often focus on disciplined contributions. Some are aimed at specific groups such as unorganised workers or senior citizens, while others are designed as national retirement frameworks.
National Pension System (NPS)
It is one of the most widely used market-linked retirement options in India and is often the first answer when people search “types of pension plans” or “pension scheme” online. You contribute during your working years, choose an investment mix, and build a retirement corpus across asset classes. On exit, part of the corpus is typically used to buy an annuity for regular pension income, and the rest can be withdrawn as per rules.
Annuity-based pension plans from insurers
Annuities are products that convert a lump sum into a guaranteed income stream. You can buy an immediate annuity where payouts start right away, or a deferred annuity where payouts start later after a build-up phase.
Employer superannuation and corporate pension funds
Some employers offer superannuation funds or corporate pension arrangements as part of your compensation. Contributions may come from the employer, the employee, or both, and the corpus is invested via approved structures.
Guaranteed return pension plans and traditional retirement products
Some pension scheme offer assured benefits or guaranteed additions, usually with a longer lock-in and a conservative investment approach. These products are popular with people who want stability and dislike equity volatility. You pay premiums for years, build a corpus, and then receive pension income through an annuity or a structured payout.
How to choose the right pension plan for your life
Start with the income gap and not the product name. If your retirement calculator shows you need Rs. 60,000 per month in today’s value, plan for inflation-adjusted income rather than a fixed number that looks comforting now. Use a mixed approach where predictable income products cover essentials, and market-linked options build growth for the long run. Also, match the plan to your discipline level, because the best plan is the one you will actually fund every month.
The different types of pension plans are basically different ways to answer one question, which is how you will pay yourself when your salary stops. If you pick a pension scheme based on your income gap, risk comfort, and payout needs, you stop guessing and start building a retirement paycheck you can trust. A retirement calculator gives you the number, but your product mix gives you the outcome, and that outcome should protect both, your dignity and your independence, during retirement.
** Tax exemptions are as per applicable tax laws from time to time.
