Types of Annuity Plans


Buying an annuity plan is an important step in planning for post-retirement life. While retirement means an end to your active working years, it should not mean an end to your financial security. This is where some smart investment can help.

What are Annuity Plans?

This is an insurance instrument that pays you, either at regular intervals or as a lump sum. So, make sure to invest in a plan as early as possible to reap the benefits once you retire. The payments are determined on the length of your premium payment period.

Types of Annuity Plans

Take a look at the different types of annuity plans available in India to choose the best one for your needs.

Immediate Annuity

As evident by the name, this plan is one where the premium is paid as a lump sum amount, as opposed to periodic payments over a period of time. These payments can be used to create a pension fund that will be available to you after you retire. With such a plan, the buyer starts receiving  instant guaranteed payouts. An immediate annuity plan is one of the best instruments for those who are about retire and require some compensation with immediate effect.

Deferred Annuity

Deferred annuity begins with a somewhat delayed effect. It has an accumulation phase, during which you start building a corpus by paying regular premiums. The payout phase begins at a pre-determined time in the future. In India, deferred annuity is one of the best plans, allowing you to pay smaller and more affordable premiums to build a good nest egg. You then receive regular pay outs, similar to earning a regular income. You can even choose the payment intervals, such as monthly, quarterly, annually.

Fixed Annuity

As the name suggests, fixed annuity is meant for people who prefer fixed, risk-free instruments. A fixed plan involves a fixed initial investment, based on a set interest rate and payout period. It provides the buyer with a guaranteed sum of money at a future date, without any change till the end of the insurance.

Variable Annuity

Contrary to fixed annuity, with a variable plan, the insurance company deposits the initial corpus of the buyer into sub-accounts or a portfolio of mutual funds that the buyer chooses. The returns are then based on the performance of the linked funds. These assets can either vary or remain fixed throughout the tenure of the plan.

Lastly, while most plans provide periodic returns against a lump-sum deposit, a lump-sum annuity does the opposite. So, the plan allows the buyer to receive a lump-sum payout. To make an informed decision before you invest in an annuity plan in India, you can use an online calculator to get an estimate of the approximate amount.

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