Annuity Plans

Annuity Plans

Annuity plans serve as financial instruments designed to furnish individuals with a secure and guaranteed regular income throughout their retirement. These plans are instrumental in providing a steadfast financial foundation and promoting peace of mind during one’s post-employment years. In this arrangement, the insurer allocates your funds into investments and subsequently disburses the returns generated. Additionally, annuity plans can be utilized to furnish income support for surviving spouses or dependents.

Explore further to gain insights into the characteristics, varieties, and advantages of annuity plans in India.

What is an Annuity Plan?

An annuity plan stands as a financial product designed to furnish individuals with a consistent income stream over a specified duration, typically during retirement. This arrangement functions as a contractual agreement between the individual and an insurance company. The individual commits to making either a lump-sum payment or a series of payments to the insurance company, which, in turn, guarantees periodic payments in return.

The available options within annuity plans cater to diverse needs. Individuals can opt for either immediate or deferred annuities, each offering the choice of fixed or variable returns. Annuity plans serve as effective tools for retirement planning by ensuring a reliable income source to meet financial obligations post-retirement. They play a crucial role in addressing longevity risk, the concern of outliving one’s savings. With an annuity plan, individuals can secure a steady income stream throughout their lifetime.

Annuities can be perceived as complex by many, leading individuals to choose alternative retirement plans. However, here, we aim to demystify annuities and provide clarity on how they can effectively support you during retirement.

Types of Annuity Plans

Listed below are the types of annuity plans. 

  • Deferred Annuity

Deferred annuity plans offer a systematic approach to generating a future stream of income for individuals. Let’s consider a scenario where a 30-year-old individual makes a lump-sum payment to acquire a deferred annuity plan on January 1, 2020. In this case, the individual plans to retire at the age of 60 and only needs payouts starting from the year 2050.

Upon receiving the payment, the insurance company responsible for the annuity will invest the funds in diverse assets such as stocks, bonds, and mutual funds. The primary objective of this investment is to generate returns over the deferral period. After the specified deferral period has elapsed, on the agreed-upon date (in this case, the year 2050), the individual begins to receive regular payments from the annuity.

  • Immediate Annuity Plans

Immediate annuity plans offer a prompt and consistent income stream to individuals right after they make a lump-sum payment to the insurance company. Upon receiving the payment, the company invests the amount in various assets, subsequently providing monthly or annual payouts to the individual. The specific payment amounts are determined by factors such as the individual’s age, prevailing interest rates, and the timing of the annuity purchase.

Immediate annuities serve as a convenient and swift solution for individuals who have accumulated a lump sum, providing them with a guaranteed income for life. These plans play a crucial role in addressing concerns related to outliving savings or meeting financial obligations post-retirement.

  • Variable Annuity

Variable annuity plans derive their name from the fact that the payout is not fixed, and it varies based on the market performance of the insurance company. Unlike fixed annuities, where the payout is predetermined, variable annuities are tied to the ups and downs of the market.

The variability in payouts results from the underlying investments, which can include stocks, bonds, and mutual funds. The returns on these investments influence the amount that the annuity holder receives. Therefore, if the market performs well, the payouts from the variable annuity may be more lucrative.

Variable annuity plans are generally more suitable for investors who are comfortable with higher levels of risk. This is because the returns are directly linked to market fluctuations, and as such, there is a potential for both higher gains and losses.

  • Fixed Annuity

A fixed annuity offers a secure income stream to individuals in their retirement years. In this arrangement, individuals usually contribute a lump sum to an insurance company, which commits to providing a predetermined rate of return on their investment, irrespective of market fluctuations. The funds from the fixed annuity are prudently invested by the insurance company in low-risk assets, including bonds and other fixed-income investments. The individual is assured of a consistent and fixed rate of return on their investment throughout a specified period, which can range from a few years to several decades. Upon the conclusion of the accumulation phase, the individual begins to receive regular income payments from the fixed annuity.

What are the Features and Benefits of Annuity Plans?

The following are the key features and benefits of annuity plans. 

  • Safe Investment Option

Annuity plans offered by insurance companies in India fall under the regulatory oversight of the Insurance Regulatory and Development Authority of India (IRDAI). This regulatory framework ensures that annuity plans are a secure investment option for individuals. To maintain compliance, insurance companies must adhere to specific financial requirements set by the IRDAI, reinforcing their ability to fulfill obligations to annuity holders. This additional layer of regulation enhances the safety and reliability of annuity plans as a financial instrument for investors.

  • Financial Security

Annuities stand out as a financial instrument that provides a reliable and guaranteed stream of income, offering a sense of financial security. In contrast to other investment options like stocks or bonds, annuities come with the assurance of a guaranteed rate of return and a steady income stream, particularly after retirement.

  • Flexibility in Payouts

Annuities grant individuals the flexibility to select a payout option that aligns with their specific needs and preferences. Some plans provide the choice of receiving payments for a predetermined period, such as 10 or 20 years, offering a fixed term for income. Alternatively, other policies allow individuals to opt for regular payouts that continue for the duration of their entire life.

  • Additional Benefits

Annuities come with additional features and benefits that contribute to their appeal. Firstly, they offer tax-deferred growth, allowing individuals to invest and accumulate a corpus without incurring taxes until they begin receiving payouts. This tax-deferred growth enhances the value of the investment over time, proving advantageous for those aiming to build a substantial retirement fund.

  • Prepare for Uncertainties

In the realm of annuity planning, it’s crucial for your accumulated funds to not only cover essential needs but also account for potential contingencies that could deplete your savings. The combination of guaranteed and inflation-beating returns in your retirement plan serves as a robust strategy to prepare for unforeseen emergencies with ease.

  • A Stable Income

Engaging in annuity planning plays a pivotal role in securing your future by ensuring a consistent and reliable income to sustain your lifestyle. By planning well in advance, you can reap the benefits of a stable income during your retirement years. This financial security allows you to enjoy quality time with your family, achieve your goals, and pursue hobbies without the worry of financial instability.

  • Tax Benefits

The tax benefits associated with your annuity plan can contribute to additional savings. Through tax deductions available under Section 80C of the Income Tax Act, you have the opportunity to claim deductions on the premiums paid toward the policy. This provision not only supports your financial planning by reducing taxable income but also enhances the overall attractiveness of annuity plans as a tax-efficient investment option.

  • Fulfillment of Goals

The regular income provided by your annuity plan empowers you to concentrate on both your long-term and short-term goals. This financial stability allows you to set aside funds for major upcoming expenses while concurrently ensuring a steady income stream for essential needs for you and your family.

How Does Annuity Work?

Annuities offer a reliable and guaranteed stream of income post-retirement, serving as a means to accumulate funds for the future, particularly during retirement. To initiate an annuity, individuals can opt for a series of payments or make a lump-sum payment to an insurance company. The insurance company, in turn, invests the contributed funds to build up a corpus for the future.

Upon purchasing an annuity, individuals have the flexibility to choose the frequency, amount, and duration of the payments they wish to receive. Most contemporary annuity plans extend lifelong payments, providing a financial cushion throughout an individual’s retirement years. This structure ensures a stable and consistent income source, enhancing financial security during the post-employment phase of life.

In the given example, Suresh, a 45-year-old professional, aims to secure a regular income during his retirement and decides to invest Rs. 20 Lakh in an annuity plan. This investment is spread over 10 years, with Rs. 2 Lakh contributed each year. The annuity plan is designed to accumulate returns on this investment for the next 15 years or until Suresh reaches the age of 60 and retires.

Upon reaching the age of 60, the annuity plan locks in the current annuity rates. Subsequently, Suresh is set to receive a regular income for the rest of his life. The annual payout can vary, falling within the range of Rs. 2 Lakh to Rs. 2.5 Lakh. This structure ensures that Suresh, upon retirement, will have a consistent and predetermined income stream, providing financial stability throughout his retired years.

When you’re ready to start getting paid, you’ll get your initial investment back together with any interest, less whatever costs the plan management company charges. Annuities can be divided into two categories: variable and fixed. A fixed rate of return is offered by fixed annuities. The performance of the underlying investments determines the returns on a portfolio of stocks, bonds, and mutual funds that are invested in through variable annuities.

Top Annuity Plans in India: An Overview

Here is the complete list of top and popular annuity plans in India. 

1. HDFC Life Systematic Retirement Plan

The HDFC Life Systematic Retirement Plan is a Savings Deferred Annuity Plan designed for individuals or groups. It falls under the category of Non-Participating and Non-Linked plans. This unique retirement plan provides you with the opportunity to systematically save for your golden years.

Key Features and Benefits:

  • Deferment Period Option: You have the flexibility to defer annuity payouts by selecting a deferment period, allowing you to align the plan with your specific financial goals and retirement timeline.
  • Guaranteed Lifetime Income: By paying premiums for a limited payment term, you can secure a guaranteed income for your entire life, providing financial security during your retirement years.
  • Flexible Payout Frequencies: The plan gives you the choice of receiving annuity payments on a monthly, quarterly, half-yearly, or yearly basis, allowing you to tailor the payout schedule to your preferences and financial needs.

Eligibility Criteria:

ParametersMinimumMaximum
Entry Age45 years75 years
Annuity Payout Per installment

Annual: Rs. 12,000; Half Yearly: Rs. 6,000;

Quarterly: Rs. 3,000; Monthly: Rs. 1,000

No limit. Acceptance of any case is subject to Board Approved Underwriting Policy (BAUP).
Premium Per installment

Annual: Rs. 30,000; Half Yearly: Rs. 15,300;

Quarterly Rs. 7,800; Monthly: Rs. 2,625

No limit. Acceptance of any case is subject to Board Approved Underwriting Policy (BAUP).
Group Size (For Group Policies)10No limit. Acceptance of any case is subject to Board Approved Underwriting Policy (BAUP).
Premium Payment Term5 years15 years

2. Bajaj Allianz Life Guaranteed Pension Goal

The Bajaj Allianz Life Guaranteed Pension Goal is a plan designed to secure your lifestyle goals by providing guaranteed income throughout your life according to your preferences and needs. This plan is structured to offer assurance and financial stability, supporting individuals in meeting their lifestyle objectives during their retirement years.

Key Features and Benefits:

  • Retirement Planning: Bajaj Allianz Life Guaranteed Pension Goal is specifically designed for retirement planning, helping you secure a regular income post-retirement.
  • Guaranteed Returns: The plan may offer guaranteed returns, providing you with a predictable and assured income stream.
  • Tax Benefits: You might be eligible for tax benefits on the premiums paid and the benefits received, as per the prevailing tax laws.

Eligibility Criteria:

ParametersMinimumMaximum
Entry Age

Immediate Annuity 

30 years

Deferred Annuity 

45 years

Immediate Annuity 

85 years

Deferred Annuity 

84 years subject to Annuity starting at a maximum age of 85 years

Minimum Annuity Amount

Immediate/Deferred Annuity

Yearly- Rs. 12, 000

Monthly- Rs. 1, 000

No Limit
Modes of Payment of Premium (only under Deferred Annuity Regular/Limited Premium)

Yearly, half-yearly, quarterly, monthly

Quarterly & monthly Premium frequencies are available only with auto-debit mode (as approved by RBI)

Premium Payment Term

Single Premium (Immediate / Deferred Annuity)

Single Premium

Regular Premium (Deferred Annuity)

Minimum

5 years

10 Years
Group Size5 Members

3. Tata AIA Saral Pension Plan

The Tata AIA Saral Pension Plan offers the guarantee of a consistent and regular income through a single payment. The plan is designed to accommodate diverse preferences and needs by providing two distinct annuity options. This flexibility aims to meet the varied requirements of individuals seeking financial security during their retirement years.

  • Option A: Life Annuity with a Return of 100% of the Purchase price (ROP)
  • Option B: When the final survivor passes away, a joint life last survivor annuity with a 100% return of purchase price (ROP) is paid out. Once chosen, an annuity option cannot be altered.

Key Features and Benefits:

  • Single Premium Payment: The plan typically involves a single premium payment, simplifying the payment process.
  • Guaranteed Regular Income: Tata AIA Saral Pension Plan assures a stable and regular income stream, providing financial security during the policyholder’s retirement.
  • Two Annuity Options: The plan offers two annuity options, allowing individuals to choose the one that best aligns with their preferences and financial goals.

Eligibility Criteria:

ParametersMinimumMaximum
Entry Age40 years

For Other than PoS: 80 years

For PoS: 70 years

Annuity Payout (Rs.)

Annually: Rs. 12,000

Half-yearly: Rs. 6, 000

Quarterly: R. 3, 000

Monthly: Rs. 1, 000

No Limit
Premium payment periodSingle Premium

4. ICICI Pru Guaranteed Pension Plan

The ICICI Pru Guaranteed Pension Plan offers the flexibility for you to decide when you want to retire, providing guaranteed lifelong income. This plan ensures a consistent income source, allowing you to sustain your preferred lifestyle even after retirement. You have the freedom to choose the frequency of receiving income, whether on a monthly, quarterly, semi-annual, or annual basis.

Key Features and Benefits:

  • Annuity Options: You can select from a diverse range of 11 annuity options tailored to accommodate your specific financial requirements and preferences.
  • High Purchase Price Benefit: The plan offers a High Purchase Price Benefit, providing additional annuity based on the purchase price slab and chosen annuity option.
  • Flexibility in Life Coverage: You have the flexibility to opt for the plan either as a single life or joint life, allowing you to customize the coverage based on your needs and circumstances.

Eligibility Criteria:

ParametersMinimumMaximum
Age30 Years65 Years
Pay-outsannuity monthly, quarterly, half-yearly or yearly
Top-Up OptionAvailable

5. Max Life Guaranteed Lifetime Income Plan

With the Max Life Guaranteed Lifetime Income Plan, you have the opportunity to initiate early retirement planning. By starting your investments today, you can create a secured and guaranteed lifetime income stream for the future. The deferred annuity variant provides the option to plan for your retirement in advance, allowing you to lock in higher annuity rates in the present, ensuring a risk-free and lifelong payment arrangement.

Key Features and Benefits:

  • Guaranteed Lifelong Income: The plan ensures a guaranteed income for the policyholder’s needs throughout their life.
  • Joint Life Annuity Option: In the event of the policyholder’s absence, the partner has the option to continue receiving the income through the joint-life annuity.
  • Deferred Annuity Variant Benefit: With the Deferred Annuity variant, in case of the annuitant(s)’ death, the nominee is entitled to receive a minimum of 105% of the purchase price of the policy. This feature provides a financial safeguard for the nominee.

Eligibility Criteria:

ParametersImmediate AnnuityDeferred Annuity
Minimum25 years25 years
Maximum85 years85 years
Premium Payment TermSingle PaySingle Pay and Limited Pay (5 to 10 years)
Premium Payment Mode
  • Single Pay
  •  Limited Pay: Annual, Semi-annual, Quarterly, Monthly

6. Kotak Lifetime Income Plan

Kotak Life Insurance introduces the Kotak Lifetime Income Plan, an immediate annuity plan that is non-linked and non-participating. This plan provides you or your members with the assurance of a consistent and regular stream of income throughout life.

Key Features and Benefits:

  • Ensure Financial Independence Post Retirement: The plan aims to secure financial independence after retirement by providing regular payouts to meet post-retirement financial needs.
  • Offer a Variety of Income Options: With a diverse range of income options, the plan caters to different retirement needs. It provides flexibility to choose the option that best aligns with individual preferences and requirements.
  • Six Annuity Options: The plan offers six annuity options, providing a variety of choices to meet various customer needs. Individuals can select the option that suits them the most.

Eligibility Criteria:

ParametersMinimumMaximum
Entry Age45 Years (For New Individual Customer)99 Years
Single PremiumMin: Any amount that ensures minimum monthly annuity of Rs.1000 (per member for Superannuation Fund)No Limit
Minimum Annuity

Monthly: Rs. 1,000

Quarterly: Rs.3,000

Half-Yearly: Rs. 6,000

Yearly: Rs. 12,000

7. SBI Life – Saral Pension

SBI Life – Saral Pension is a single premium, non-linked, non-participating, and immediate annuity product designed for individuals. With this plan, you can enjoy regular income along with the return of the purchase price, all without making any compromises. The product aims to provide financial independence through a straightforward process, allowing you to lead a content and happy retired life.

Key Features and Benefits:

The features of the plan include:

  • Maturity Payout: On maturity, the Sum Assured, along with accrued Simple Reversionary Bonus and terminal bonus, is paid out in the form of an annuity. This annuity can be received immediately or deferred to purchase a Single Premium Deferred Annuity plan.
  • Commuted Corpus: At the time of purchasing the annuity, the policyholder has the option to commute up to 1/3rd of the corpus.
  • Extension of Accumulation Period: If the policyholder’s age is below 55 years, the accumulation period can be extended, providing flexibility in the policy’s duration.

Eligibility Criteria:

ParametersMinimumMaximum
Age at Entry* (as on last birthday)40 Years80 Years
PremiumSuch that the minimum annuity installment can be paid as per the annuity payment modeNo limit, as per Board Approved Underwriting Policy
Minimum Annuity Payout

Monthly: Rs. 1,000

Half-Yearly: Rs. 6,000 Quarterly: Rs. 3,000 Yearly: Rs. 12,000

No limit, as per Board Approved Underwriting Policy
Premium Payment TermSingle Premium
Annuity Payment ModeMonthly or Quarterly or Half-Yearly or Yearly

8. Indiafirst Life Guaranteed Annuity Plan

The IndiaFirst Life Guaranteed Annuity Plan is a comprehensive annuity pension plan that provides a range of options for customization to meet specific retirement needs. Policyholders can choose the type of annuity, decide when to commence receiving retirement income, and even incorporate protection against critical illnesses. This flexibility allows individuals to tailor the plan to align with their unique requirements, enhancing the overall suitability and effectiveness of the retirement policy.

Key Features and Benefits:

The IndiaFirst Life Guaranteed Annuity Plan offers the following key features:

  • Immediate Pension Payments: This plan provides one-time payment with immediate annuity payments unless deferred annuity options are chosen. This allows individuals to invest a significant corpus in later years and start receiving pension payments immediately.
  • Peace of Mind: The plan offers 12 different annuity options, providing flexibility and ensuring peace of mind. Whether choosing a deferred annuity, escalating life annuity, or annuity, individuals can select options that suit their preferences.
  • Protection for Loved Ones: The plan serves a dual purpose as both an investment instrument and a life cover. In the event of the policyholder’s untimely demise, dependents receive a lump sum payout in the form of the sum assured from the retirement insurance plan, depending on the chosen annuity option.

Eligibility Criteria:

ParametersMinimumMaximum
Entry Age40 years80 years
Purchase PriceRs. 1,00,000No Limit
Annuity amountRs. 1,000 monthlyNo Limit

9. PNB MetLife Immediate Annuity Plan

PNB MetLife Immediate Annuity Plan is an individual, non-linked, non-participating, immediate annuity product designed to offer flexibility in customizing your retirement plan according to your preferences. With this plan, you can secure guaranteed income for the entirety of your life, providing financial stability during your retirement years.

Key Features and Benefits:

The PNB MetLife Immediate Annuity Plan offers the following key features:

  • Single Premium Payment: Ensure guaranteed income for your lifetime with a one-time payment.
  • Lifetime Income for Spouse: Provide financial security for your spouse by ensuring a lifetime income for them, even in the event of your demise.
  • Return of Invested Capital: Leave a legacy for your family through the return of the invested capital in the plan upon your demise.

Eligibility Criteria:

ParametersMinimumMaximum
Age at entry

Standalone Annuity

Single Life options: 30 years

Joint Life options: 40 years
(both primary and secondary lives)

Tied Annuity

Single Life options: 0 years

Joint Life options: 18 years
(both primary and secondary lives)

Standalone Annuity

75 years

Tied Annuity

90 years

Annuity PayoutRs. 1,000 per monthSubject to entry age of Annuitant & Purchase Price
Annuity Payout ModeYearly/Half Yearly/Quarterly/Monthly

10. LIC’s New Jeevan Shanti

LIC’s New Jeevan Shanti is an annuity plan that can be acquired by making a lump sum payment. The primary feature of the plan is to provide annuity payments of a specified amount throughout the lifetime of the annuitant. This ensures a steady and regular income for the annuitant, contributing to financial security during their retirement years.

Key Features and Benefits:

  • Retirement Income: A deferred annuity plan serves as a valuable tool to create a guaranteed and reliable source of income during retirement. Contributions made during the working years accumulate, forming a substantial fund that is later converted into regular annuity payments, providing financial support in retirement.
  • Lifetime Income: These plans can be structured to offer lifetime income, assuring policyholders that their retirement savings will continue to provide income throughout their life. This feature protects against longevity risk, providing peace of mind during retirement.
  • No Contribution Limits: Deferred annuity plans often do not have contribution limits, allowing individuals the flexibility to invest more for retirement as needed. This absence of contribution limits can be advantageous for those seeking to maximize their retirement savings.

Eligibility Criteria:

ParametersMinimumMaximum
Age30 years79 years for Deferred annuity
Purchase LimitsRs.1,50,000/-No maximum limits for the purchase price, annuity, etc.
Annuity ModeAnnuity may be paid either at monthly, quarterly, yearly, or yearly intervals. You may opt for any mode of payment of Annuity.
Deferred AnnuityIt is available after Deferment of a Minimum of 1 year and a Maximum of 12 years.

Factors to Consider Before Investing in Annuity Plans in India

  • Category of Annuity

Annuity plans come in a variety of forms, including fixed and variable, as well as immediate and delayed. Everyone has special qualities and advantages. You need to decide on a plan that will assist you in reaching your retirement objectives and financial commitments.

  • Financial Commitment

Annuity plans usually involve a substantial outlay of funds, either in the form of a single lump sum payment or several installments of premium payments. To be sure you can meet the financial commitment needed for the annuity plan, you should carefully review your financial status and budget.

  • Age and Health Requirements

Age and health restrictions, such as upper and lower age limitations or prerequisites for medical underwriting, may apply to annuity plans. Verify your eligibility for the annuity plan by reviewing the requirements set forth by each insurance provider.

  • Options for Payout

Annuity plans include a range of payout options, including the duration of the payments—for example, for a predetermined number of years or the remainder of your life. Analyze your demands and financial goals to choose the optimal payment choice.

  • Annuity Payout Period and Frequency

You can customize the length of time and frequency of the annuity or regular income stream under the plan with insurance firms.

Annuity payouts can be made for a set amount of time or the rest of your life. Additionally, you have the option to receive them quarterly, semi-annually, annually, or monthly.

Frequently Asked Questions

Annuities might be a beneficial investment or not depending on your financial objectives, situation, and risk tolerance. These plans can offer a retirement income stream that is guaranteed, which is advantageous for people who need a steady source of income. An annuity’s features and costs should be thoroughly considered before choosing one.

Annuities are subject to numerous restrictions and guidelines in India as well. The Insurance Regulatory and Development Authority of India (IRDAI), for instance, establishes regulations for annuity plans that insurance providers in India sell. The maximum premium amount, the lowest and maximum annuity payment amounts, and the minimum and maximum ages at which a person can buy an annuity are some examples of these rules.

If you have a single-life annuity, the insurance company will get the remaining money in the event of your death and the payments will cease. If you have a joint-life insurance policy, the benefits are paid out to your beneficiary upon your death. There are riders for death benefits on some annuities. It makes a payment to your recipient.

The best time to purchase an annuity relies on many variables, such as life expectancy, retirement objectives, and existing financial status. Generally speaking, anyone getting close to retirement age can buy an annuity. These plans are usually bought by people who are 55 to 75 years old.

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