Pension analysts say that immediate annuity plans could generate guaranteed income at the rate of 7.44% to 9.78%, owing to the falling interest regime expected in India, says an article published in The Times of India in December 2015. Unlike the developed nations, where the government has a national social security system to take care of its elderly citizens, India has no such setup. Therefore, it is essential that you plan your retirement as early as possible. The IRDA has made it mandatory for individuals receiving retirement money to invest one-third of it in an annuity product.
What Does Immediate Annuity Offer?
Annuity is a pension product that covers the risk of outliving your retirement corpus. Annuities can be off two types: immediate and deferred. Payments start within the next month of buying a plan in case of an immediate annuity plan. While in case of the latter, payments are made at certain intervals at the discretion of the buyer. The former is a single premium policy, while the latter has a premium payment window. You can avail the benefits of an immediate plan from as early as 40 years of age. Although you might still be working, there is no harm in receiving the benefits of your investment. It is much like a second income. Given below are some characteristic features of an immediate plan:
- One Time Premium Payment – There is a one-time premium payment both for one life and for joint annuity.
- Immediate Payment – After paying the premium, the payouts start one month, three months, six months or after a year, depending on the type of payout option chosen (monthly, quarterly, half-yearly, yearly).
- For Anyone Above the Age of 40 – You can buy annuity for yourself (which starts after the age of 40) or for your parents or other relatives who are above the age of 40.
- Different Options to Choose From – You can choose from a wide range of options, such as annual increase, capita refund, capital refund in parts and balanced capital refund. In the annual increase option, payouts increase over time. In capital refund and capital refund in parts, the amount is paid to the nominee after the death of the annuitant. In balanced capital refund, the nominee is only paid after the death of the annuitant if there is any positive balance left after deducting the annuities paid from the premium.
- Additional Benefit – You can also opt for an accidental death rider by paying an additional single premium. In such a case, the nominee will get 12 times your annual payout in the event of your accidental demise.
If case of an immediate annuity plan, you can also buy a new plan every year or every few years to enhance your annuities with your changing needs.