But don't worry, you can avoid such a situation if you start providing for a comfortable retired life as soon as possible. All you need to do is to deploy a small part of your current income to provide for cash flows that last your lifetime.

Retirement planning assumes increased significance as the good old government jobs, providing lifelong pension and free or subsidised health care, are not common now.

With declining standards of public healthcare and absence of any social security, the retirees today can be in for a big surprise. In short, the retirement-planning atmosphere is witnessing a dramatic shift, moving from a system of dependence to one of increased self-reliance.

Given the kind of changes in the organised and unorganised employment sector, it's impossible to tell what the future holds. And no matter what awaits us, it is very clear that time is running out fast, if you do not take charge of your financial destiny.

Investment options
PPF/NSC: Some of the most preferred savings instruments for a longer duration are Public Provident Fund and National Savings Certificates (VIII). These are basically tax saving instruments but are a good bet for retirement planning. PPF is eligible for a maximum rebate of Rs 12,000 and the interest income is also exempt from tax. Interest income on NSC is eligible for deduction under section 80L, while the lumpsum amount received on maturity is also exempt from tax. Both the instruments offer an assured return of 11 per cent, each per annum.

LIC's Jeevan Suraksha: Life Insurance Corporation's Jeevan Suraksha also helps you save for your retirement. One can contribute Rs 150, and draw a pension after the age of 55 years or a life-long monthly pension with an option to commute 25 per cent of the corpus. Investment under the policy is deductible from income for income tax under section 80CCC(1), subject to a maximum of Rs 10,000.

In other words, if your income is Rs 1 lakh per annum, income tax will be charged only on Rs 90,000 on an investment of Rs 10,000 in this scheme. Being a pension-cum-insurance scheme, it provides a fixed return to investor after his superannuation. Besides, the scheme gives 50 to 85 per cent of the target annuity as family pension. The policy comes with or without insurance benefits.

Besides the above options which are mainly fixed-income yielding, two dedicated pension funds are available today, which in their present form are strait jacket balanced fund. This may not be the ideal solution for many investors but is the best available given the tax break and upside for their equity allocation. Though these fund are well suited for a conservative investor, the key reason why these funds are not ideal of long-term saving. This is because regulations do not permit these funds to have a significant exposure to equities - the best performing asset class over long-term though volatile over short time periods. Investments in these funds are also eligible for tax rebate upto a maximum of Rs 12,000 on an annual investment of Rs 60,000.

Kothari Pioneer pension plan: Launched in March '97, investment has to be a minimum of Rs 10,000 in lumpsum or in installments of at least Rs 500 upto the age of 58 years. After the specified time, subject to a three-year lock-in, three choices are available for investors - regular income that leaves the corpus intact, partial withdrawal with income on the balance units and full withdrawal. For any withdrawal before the age of 58, the fund charges a 3 per cent load (10 per cent load if the total sum invested on the date of redemption is less than Rs 10,000).

UTI's RBUP: Launched in 1994, the scheme involves a minimum contribution of Rs 10,000 in lumpsum till the age of 58 years or in installments of at least Rs 500 till the age of 52 years. The fund distributes monthly income starting from the age of 58, subject to a lock-in of 5 years. Repurchase is allowed after 70 years. Any premature repurchase attracts a 10 per cent load.

The ideal form of a pension fund will be a provision of a pension option in all kind of funds like equity, debt and balanced, the way we had the Section 54EA and EB options. This coupled with reasonable tax break for investment with a lock-in till an investor retires or attains a stipulated retirement age. Besides, there should be stiff deterrent by way of penal tax for early exit. Following this model, overnight we will have a wide choice of flexible pension plans.

Value Research