Annuity Plans – Definition, How it Works, Types, Eligibility, Features, Benefits, Eligibility Criteria | Buy and Renew Online

What is an Annuity Plan? - Definition

An Annuity is a type of Pension Plan where the Annuitant makes regular premium payments or a onetime lump sum payment to the Insurance Company and receives a guaranteed, regular, lifetime pension as an Annuity after retirement. The Annuity Payments can begin immediately after payment of the lump sum amount or after the completion of a pre-defined tenure.

How does an Annuity Plan work?

An Annuity Plan works in the following manner:

1. Accumulation Stage: An Annuity is a Contract between the Annuitant (Policyholder) and the Insurance Company wherein the Annuitant (Policyholder) makes a one-time lump sum contribution or regular periodic premium payments to the Insurance Company. This stage where the Policyholder makes regular payments to the Insurance Company is known as the Accumulation Stage.
2. Payment Stage: The Insurance Company invests the money received as Premiums to build a Corpus from which it can make Annuity Payments to the Policyholder. After the passage of a pre-specified time period, the Insurance Company begins to make regular and periodic payments to the Policyholder.

The Policyholder can choose the frequency of Annuity Payment and whether he wants to receive payment on a monthly, quarterly, or annual basis. The Policyholder can also choose for how long he wants to receive the Pension Payments. He can opt to receive Pension Payments even for a Lifetime. An Annuity Plan allows the Policyholder to lock in Interest Rates for a long period of time or even a lifetime. The Annuity Payments do not change even if interest rates change.

What are the different types of Annuities?

The different types of Annuity Plans are as follows:

Annuity Plans based on Payout

1. Deferred Annuity Plan: A Deferred Annuity Plan offers a fixed income starting from a future date chosen by the Policyholder. You make a one-time lumpsum premium payment or a series of premium payments over a pre-defined time period. After the end of Waiting Period/Deferment Period, the Annuity Plan starts to pay a fixed income to the Policyholder.
2. Immediate Annuity: An Immediate Annuity Plan offers a fixed income to the Policyholder starting immediately. You make a one-time lumpsum premium payment and start receiving regular payouts immediately.

Annuity Plans based on Payout Duration

1. Lifetime Annuity Plan: A Lifetime Annuity Plan makes regular annuity payments for your entire lifetime. You will continue to receive payments as long as you are alive.
2. Fixed Period Annuity: A Fixed Period Annuity Policy provides you with consistent as well as pre-determined payments for a specific period of time i.e. 10 years or 20 years. Fixed Period Annuity Plans provide a pre-determined number of Annuity Payments for a chosen duration.

Annuity Plans based on Returns

1. Variable Annuity: Variable Annuities provide returns which are linked to the market. You make a one-time lumpsum payment to the Insurance Company which invests the money in various investment options such as Mutual Fund or Stocks. The value of the Variable Annuity Plan fluctuates based on the performance of the underlying investments. Some Annuity Plans allow you choose the percentage of money to be allocated to various investment options.
2. Fixed Annuity: A fixed annuity provides a guaranteed income stream after you retire. With a fixed annuity, you make a one-time lump-sum or a series of periodic payments to the Insurance Company, and in return, the Insurance Company guarantees to pay a Fixed Rate of Return on your investment. A Fixed Annuity provides a guaranteed Rate of Return, irrespective of market conditions. The Insurance Company invests the money from the fixed annuity in low-risk assets, such as bonds. 0or other fixed-income investments.

Annuity Plans based on Beneficiaries

1. Single Life Annuity: A Single Life Annuity Plan provides regular annuity payments for your lifetime. The Annuity Payments stop upon your demise.
2. Survivor/Joint Life Annuity: A Joint Life Annuity Plan provides regular annuity payments for 2 individuals (yourself and the spouse). The Annuity Payments continue even upon your demise and your spouse continues to receive the Annuity Payments.

Why do you need to invest in an Annuity Plan?

You should invest in an Annuity Plan for the following reasons:

1. Lifetime Income: An Annuity Plan provides Lifetime Income and allows you to lock-in interest rates for a long period of time. The Annuity Payments do not change even if the Interest Rates change. This provides certainty of cashflows.
2. Retirement Planning: An Annuity Plan is an essential tool in retirement planning. After retirement, when your salary/business income stops, an Annuity Plan can be of great assistance by providing you with a Guaranteed, Lifetime Pension.
3. Financial Security for Spouse: An Annuity Plan offers financial security for dependent spouse as by offering payments even after your death.

What are the features of Annuity Plans?

1. Guaranteed Income: An Annuity Plan provides Guaranteed, Lifetime Income which does not change even with change in Interest Rates. This is a big benefit as it provides a stable and predictable source of income
2. Flexibility in Payout: An Annuity Plan offers flexibility in payout options. You can choose the frequency of Annuity Payments, whether you want to receive payment on a monthly, quarterly, or annual basis. Additionally, you can also choose the duration for which you want to receive the Annuity Payment. You can opt to receive Annuity Payments even for a Lifetime.
3. Death Benefit: Annuity Plans also offer Death Benefit where the Policy pays a lumpsum amount to the nominee in case of your death. This amount provides financial security for your loved ones.
4. Joint Life: Annuity Plans offer a Joint Life Option where the Spouse continues to receive the Annuity Payments in case of your absence. This assures financial security for your spouse.
5. Surrender Value: Annuity Plans have Surrender Value, which is a cash value if you terminate the plan prematurely. This ensures access to funds during emergencies.

What are the Benefits of Annuity Plans?

The benefits of Annuity Plans are as follows:

1. Lifetime Income: Annuity Plans offer a steady, guaranteed, lifetime income. This is a big benefit as people are worried about outliving their savings.
2. Protection against Market Volatility: Annuities offer a fixed and guaranteed return irrespective of the rate of interest or market conditions. On the other hand, if you invest in stocks or bonds, you are vulnerable to market volatility or changes in interest rates.
3. Tax Deferral: Annuity Plans also offer the benefit of Tax Deferred growth as Earnings from Annuity Plans are taxed only when you start making withdrawals.
4. Death Benefit: Some Annuity Plans offer Death Benefit where the Policy pays a lumpsum amount to the nominee in case of your death. This amount provides financial security for your loved ones.
5. Payout Flexibility: Annuities offer multiple payout options, giving you the flexibility to manage your finances
6. No Cap on Investment: Annuity Plans do not have any limits on the investment amount unlike other Plans such as Senior Citizen Savings Scheme.

Which are the Best Annuity Plans in India?

The list and features of Best Annuity Plans in India are as follows:

HDFC Life Smart Pension Plus Plan

HDFC Life Smart Pension Plus Plan is a Non-Linked, Non-Participating Plan which provides a Guaranteed Annuity Payment for your Whole Life. The Plan offers both, Immediate and Deferred Annuity Options.

Key Features of HDFC Life Smart Pension Plus Plan

1. Guaranteed Income for Life: HDFC Life Smart Pension Plus Plan provides a guaranteed Annuity Payments for Life.
2. Flexibility to choose Payout Frequency: You can choose to receive payouts on a Monthly, Quarterly and Annual basis.
3. Flexibility in when to receive payout: You can choose to receive payouts on an Immediate Basis or on a Deferred Basis.
4. Flexibility in Premium Payment: You can pay the Premium as a Single Premium or as a Limited Payment Term.
5. Option to choose Single or Joint Life Annuity: You can chose Single life or a Joint Life Annuity to provide financial support to your spouse after your demise.
6. Various Annuity Options: The Plan offers 4 annuity options to choose from:
   • Life Annuity
   • Life annuity with Return of % of Total Premiums paid
   • Life Annuity with Early Return
   • Increasing Annuity

ICICI Pru Guaranteed Pension Plan

ICICI Pru Guaranteed Pension Plan is a Non-Linked, Non-Participating Plan which provides a Guaranteed Annuity Payment for your Whole Life. The Plan offers both, Immediate and Deferred Annuity Options.

Key Features of ICICI Pru Guaranteed Pension Plan

1. Guaranteed Lifetime Income: ICICI Pru Guaranteed Pension Plan provides a guaranteed Annuity Payments for Life.
2. Flexibility to choose Payout Frequency: You can choose to receive payouts on a Monthly, Quarterly, Semi-Annual and Annual basis.
3. Flexibility in when to receive payout: You can choose to receive payouts on an Immediate Basis or on a Deferred Basis.
4. Return of Purchase Price: The Policy provides an option to Receive Return of Purchase Price.
5. Early Return of Purchase Price: The Plan also provides an option to receive purchase price back from age 76 or at age 80
6. Option to choose Single or Joint Life Annuity: You can chose Single life or a Joint Life Annuity to provide financial support to your spouse after your demise.
7. Various Annuity Options: The Plan offers 11 annuity options to choose from including With Return of Premium and Without Return of Premium Option.
8. Higher Purchase Price Benefit: The Plan provides a High Purchase Price Benefit which gives you additional annuity as per the purchase price slab and annuity option.

Axis Max Life Guaranteed Lifetime Income Plan

Max Life Guaranteed Lifetime Income Plan is a Non-Linked, Non-Participating Annuity Plan providing a Guaranteed Income after Retirement.

Key Features of Axis Max Life Guaranteed Lifetime Income Plan

1. Guaranteed Lifetime Income: Axis Max Life Guaranteed Lifetime Income Plan provides guaranteed income for entire life
2. Flexibility to choose Payout Frequency: You can choose to receive payouts on a Monthly, Quarterly, Semi-Annual and Annual basis.
3. Flexibility in when to receive Payout: The Plan provides an option for Deferred Annuity as well as Immediate Annuity. Deferred Annuity has options for Single Pay and Limited Pay Premium Payment Option
4. Option to choose Single or Joint Life Annuity: Policy has a Joint Life Annuity Option where the Spouse continues to receive the Annuity Amount after the Primary Annuitant dies.
5. Various Annuity Options: The Plan offers 8 annuity options to choose from including With or Without Death Benefit

TATA AIA Fortune Guarantee Pension Plan

Tata AIA Fortune Guarantee Pension Plan is a Non-Linked, Non-Participating, Annuity Plan providing a Guaranteed Income after Retirement.

Key Features of TATA AIA Fortune Guarantee Pension Plan

1. Guaranteed Lifetime Income: TATA AIA Fortune Guarantee Pension Plan provides guaranteed income for entire life
2. Higher Purchase Price Benefit: The Plan provides a High Purchase Price Benefit to encourage you to save more.
3. Increase Annuity through Top-Up Premiums: The Plan provides you with an option to increase Annuity through Top-Up Premiums
4. Various Annuity Options: The Plan offers 4 annuity options to choose from including With or Without Return of Purchase Price
5. Flexibility to choose Payout Frequency: You can choose to receive payouts on a Monthly, Quarterly, Semi-Annual and Annual basis.
6. Flexibility in when to receive payout: The Plan provides an option for Deferred Annuity as well as Immediate Annuity.
7. Option to choose Single or Joint Life Annuity: Policy has a Joint Life Annuity Option where the Spouse continues to receive the Annuity Amount after the Primary Annuitant dies.

What is the eligibility criteria to purchase an Annuity Plan in India?

The eligibility criteria to purchase an Annuity Plan in India is as follows:

1. Entry Age: The Policyholder should be between 20 years to 60 years of age to be eligible to purchase an Annuity Plan in India.
2. Policy Term: The Minimum Policy Term is 5 years and Maximum Policy Term is 35 years
3. Payout Amount: You need to specify the payout amount that you wish to receive upon maturity. The payout amount determines your Premium Amount and it should be tailored to your budget and requirements.

What are the factors to consider before you invest in an Annuity Plan in India?

You should consider the following factors before selecting an Annuity Plan:

1. Annuity Amount: Determine the Annuity Amount that you want to receive and consider a plan which suits your budget and requirements.
2. Category of Annuity: You should consider whether you want to invest in an Immediate Annuity Plan or a Deferred Annuity Plan. An Immediate Annuity Plan provides immediate cash flows while a Deferred Annuity Plan allows for Tex Deferred growth of your contributions.
3. Payout Options: Payout Option is another important factor that needs to be considered while choosing an Annuity Plan. Life Insurance Companies offer various payout options such as Monthly, Quarterly, Semi-Annual and Annual Payouts. You should choose an option based on your needs and requirements.

What are the documents required to purchase an Annuity Plan in India?

You need to provide the following documents to purchase an Annuity Plan in India

1. Identity Proof: Passport Copy, Aadhaar Card Copy, Driving License Copy
2. Proof of Address: Utility Bills, Aadhaar Card Copy, Bank Statement

How to purchase an Annuity Plan with Qian Insurance?

1. Contact Qian Insurance via email at insurance@qian.co.in or call us on 022-35134695. Our team will offer various options for Annuity Plans.
2. Compare the Features and Premiums of different plans and select a plan that best suits your requirements and budget.
3. Make the Premium Payment Online and receive Policy Copy.

Get Best Quotes for Annuity Plans with Qian Insurance!

Annuity Plans offer financial security in your retirement years. It is important to take the advice of an experienced Insurance Broker when choosing an Annuity Plan. If you wish to purchase an Annuity Plan, you can you can email us at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.