A significant portion of India's working population faces difficulties in setting up a well-organized retirement plan that includes timely savings and investment. So many people retire with less than sufficient securities and look for meaningful schemes or plans to invest their savings in and grow their money. There is a practical demand for financial products that could usher in a regular income channel for retired investors and help them live the rest of their lives without experiencing financial distress. 

Annuities are the quintessential investment product that meets this demand beautifully. The purpose of this plan is to provide financial coverage for people who have certain risks that may exceed their means and are not covered by their insurance carrier.

How do annuities work?

Types of Annuity Plans in India

Prioritising the typical patterns in elderly living, involving medical expenses, household expenses, travelling, rentals, gifts and personal security, the different types of annuities offer different means to figure out how one gets access to their own money, what the amount and for how long. While it is not the plan to secure capital gains, it is the best way to convert current money value for a higher future income. Below is a detailed guide to all the different types of annuity plans available in India. 


Types of Annuity Plan


Based on Payout Initiation of Time

Immediate Annuity

  • This plan initiates the payout, typically between one month and one year after the plan is purchased. 

  • This annuity is most suitable for individuals starting a new life with immediate access to a periodic income. 

Deferred Annuity

  • This is the best way to secure a lump-sum amount of money for the future.

  • Much like savings plans, annuitants make periodic payments to accumulate the money.  

  • The accumulation of funds typically grows the money and yields higher returns at the time of maturity. 

  • The maturity dates are decided by annuitants. 

Based on Payout Duration

Lifetime Annuity

  • It is a plan for guaranteed lifetime income, which typically lasts for more than 25 years. 

  • it has a premium payment term to accumulate the money, or you can go for lump-sum payments 

  • Lifetime annuities are usually irrevocable plans where the amount or the payment dates cannot be changed once they are purchased.  

  • This plan is immune to market fluctuations and risks and offers the most stable income to annuitants.

Period Certain Annuity 

  • This plan is capped at a predetermined period and will end regardless of your lifespan. 

  • It offers a comparatively higher monthly income than lifetime plans

  • Payment tenures could be anywhere between 5 and 20 years.  

  • If the annuitant dies during the provision period, then any remainder amount in the plan will be paid to the nominated beneficiary.

Based on Payout Types

Variable Annuity

  • In this plan, the premium paid by annuitants gets a second income potential with additional investment options on instruments like fixed-term deposits, equities or mutual funds. 

  • This plan allows annuitants to work their money in pursuit of higher returns, but it is also subject to market risks and potential losses. 

  • The performance of the selected underlying investment options determines the annuity plan's payout potential.

  • Variable annuity payouts have distinct distribution phases, where annuitants can choose to receive the payments over a stream of variable payouts or even go for a lump-sum payment. 

  • Variable annuity plans are highly flexible in terms of the basis of contract, payment tenures and other decisions based on investment portfolio performance. 

Fixed Annuity

  • This plan offers a guaranteed fixed amount of payout in fixed or deferred modes. 

  • Plans are available for both lump sums and a series of payments over time. The rate of interest earned during the accumulation phase is secured and immune to market fluctuations. 

  • Since it is a tax-qualified investment vehicle, fixed annuities essentially grow your money with a tax-deferred compound interest.

Increasing Annuity

  • Over time, this annuity plan provides a growing income stream with increasing compound interest against their investment, yielding 3% or 5% per policy term year.

  • Payout raises are progressive and involve market rates impacted by inflation.

  • The impact of growing living expenses is largely mitigated. 

Annuity with Return of Purchase Price

  • The purchase amount of this annuity plan is guaranteed to be returned to the nominee or your legal heirs in the event of your death.

  • It provides added financial protection by ensuring that the initial investment is not lost.

Based on beneficiaries

Single Life Annuity

  • The best plan is to generate a regular income stream along with high annuity rates during the pre-defined retirement years or until demise. 

  • Only one person is entitled as the annuitant, in contrast to joint life annuity 

  • It is best suited for individuals who don’t have a spouse or whose spouse has a separate annuity and can survive without receiving any portion of the couple’s income. 

Survivor/ Joint Life Annuity

  • One of the greatest annuity plans available in India for two people, typically spouses or partners, is this one.

  • As long as either party is alive, income payments will continue.

  • Even after the primary annuitant passes away, these annuity plans guarantee that the surviving spouse will continue to receive a regular income at the best annuity rates.

Benefits of Annuity Plan

Annuity is not for everyone. The benefits are particularly designed for people who need a steady income stream by reworking their savings, practically supporting a more predictable future. While sudden medical emergencies and household expenses can be widely covered under insurance, this is the second income stream that particularly attends to a definite amount of expenditure. 

Regular Income for Life 

You may keep receiving regular income after retirement by just investing your lifetime earnings in an annuity plan. This enables you to place your savings in a plan that, even after retirement, will easily cover your ongoing expenses.

Risk-Free Investment 

Compared to any other investment plan, annuities are the safest. Almost like a savings plan, it tends to grow your money. Annuity plans provide a means of both adding more regular income and a safe-keeping corpus for investors with a long-term focus who wish to develop a stable portfolio.

No Cap of Investment 

Unlike government programmes like the Senior Citizens Savings Scheme (SCSS) and Post Office Monthly Income Scheme (PO-MIS), the best annuity plans have no investment limits.

Financial Security 

Annuitants have a greater advantage than other types of investors since they enjoy greater control and command over their risk profiles. The invested funds are managed according to your preferences and safeguarded until you are prepared to take them out. Having that kind of money saved for the future can provide you with a great deal of financial security in times of need and retirement.

Benefit Flexibility 

The annuitant decides how they get paid. Whether you opt for a series of monthly payouts, like a monthly pension, invest your money in mutual funds for a higher return, or choose to withdraw the benefits at a later stage of life, your money stays yours, without worrying about losses. Additionally, depending on their preferences, investors can select whether to receive fixed or variable benefits from the plans.

Tax Deferral on Income 

Taxes do not need to be paid on your investment until you begin taking payouts. Annuities are subject to taxes in a manner akin to that of regular income.

Death Benefits 

You are also providing your spouse with an income in the event of your death when you choose a joint annuity policy. In these annuity plans, if the principal investor dies during the investment period, the insurance company continues to process the annuity payouts to the surviving spouse.

Annuities are a vital source of a guaranteed stream of income for retirees and seniors.


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