Immediate Annuity Plan vs. Fixed Deposit in India

Immediate Annuity plans are considered as pension plans in India in which pensions will payout to the annuity owner in a monthly installment by the insurance company right away. FD's maturity amount will be paid to the investor on the maturity date. These two investment plans ensure safe and risk-free investments.  

Immediate Annuity Plan

It is an annuity contract where the investor invests the lump sum money in a single premium with the insurance company. This plan will make the regular payout to the investor right away, i.e., the payouts will begin immediately. Generally, persons who are about to retire will opt for this plan to get the monthly payouts immediately after investment. In India, the annuitant can benefit from taxation. 

What is a Fixed Deposit in India?

In India, Fixed Deposits are offered by Banks, Post offices, and Non-Banking Financial Companies (NBGC’s). Fixed deposit is the safe investment method where the investor invests his/her money in a term deposit account at a fixed rate of interest and at a fixed tenure (which generally ranges from 7 days to 10-20 years). On the completion of the fixed tenure, the investor will get the maturity amount (i.e., principal amount plus compound interest on it). The deposited amount cannot be withdrawn before the end of the tenure, but in some companies, the pre withdrawal option is available subject to a penalty.

Difference between Annuity Plan and Fixed Deposit

In FD, the investor will invest the lump sum money in the term deposit account for an opted tenure, and the interest rate after that receives the maturity amount on completion of tenure. When it comes to the annuity plan, an investor invests a lump sum amount in the insurance company. The company will make payouts to the investor according to the opted length of the payment periods and invested premium. Both plans are credited to be safe and low-risk investment schemes. In addition, the investor will receive the invested capital with interest on the maturity date in both cases. However, there are some differences between the plans. They are:

Over to you

There are multiple investment schemes available in the market provided by various financial institutions. Among them, Annuity and FD investment schemes are considered safe and low-risk investment plans. There will be regular payouts in the Immediate Annuity Plan immediately to the investor with higher returns than FD. Whereas in FD, the maturity amount will be paid after the completion of tenure. These plans are opted by most people to grow their income through investments.