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Annuity plans… gift at retirement

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Insurance companies make policies that provide pension at 55 to 60 years in the retirement plans (annuity) intended for retirees. Pension can be encashed yearly or monthly per our needs. These polices form a fund that can help us lead a hassle-free life after retirement.

There are two types of pension policies

Immediate pension plans.

Deferred pension plans.

Eligibility: 18 to 85.

Premium: Monthly premiums start from 200 to 2500 and yearly 2400 to 50000. Premiums can be paid monthly, quarterly, half yearly or yearly.

Time for getting pension (deferment period):

The period of our investment is called deferment period. The investment made for a fixed time is later converted to pension. Deferment period can be anywhere from 10 to 40 years. However, premium is higher for policies that are started after the age of 60.

Policy tenure:

10, 15, 20, 25, 30, 35, 40. The policy holder will have insurance coverage during this period.

Insurance amount:

25000 to 5000000. Policy should be chosen based on income.

Pension payment:

Monthly minimum: 200 and maximum 10000.

Yearly: 1000 to 50000.

This depends upon the policy taken.

Pension for a fixed period:

We can choose pension for a fixed time instead for the whole remaining life. In these policies, even though the policy holder is alive after the policy period, he will not get pension. But if the policy holder dies before the policy period, nominee will get the pension the remaining period.

Life time pension:

Pension for the whole life of the policy holder. It stops after the death of the policy holder. Nominee will not get any benefits. That is the reason these policies have higher pension than others.

Pension to nominee:

You can choose a nominee to get the whole benefits along with you. In this, the policy holder will get pension through his lifetime and the nominee afterwards. However, this pension will be lesser when compared to others.

Tax benefits:

Exemption under section 80C of income tax but only a maximum up to 1 lakh or 1/3 of the total sum.

Fighting inflation…

Annuity can help to a certain extent to fight inflation but cannot expect high returns. Those already having NPS or PPF, these plans are of little use. Financial experts advise to go for balanced debt fund along with a pension plan instead of annuity policies.