Annuity : Buy Best Annuity Plans of 2020

Annuity plans are essentially an agreement between the two parties, one being the insurance company and the other being the buyer. It is a series of equal payments that are made at regular intervals of time.

It is a popular choice among people who want a steady income and wish to enjoy the golden period of their lives without any financial stress or burden. Post retirement it is important to have a flow of income so that you can meet the daily needs and simultaneously maintain your lifestyle too.

Annuity plans essentially offer guaranteed income throughout your life.

What is Annuity?

An annuity is a plan that enables you to receive payments regularly for a lifetime after investing a lump sum. The investment made in the annuity plans is further invested by the company and the investor is paid with the generated returns.

No matter, how well your life is going at this point. It is equally as important to secure money for the prospective times too. This is prudent for your second innings and to cover your everyday expenses.

Investing in best annuity plans 2020 will not let you worry and you will be able to secure the future for your spouse, your children, and your family.

What are the Features of Annuity Plans in India?

Annuity plans are designed in a way to give you a comfortable life after your retirement. Annuity plans give you financial security and therefore you should invest in the best annuity plan 2020.

Listed below are some of the key features offered within annuity plans in India 2020:

Safe Investment Option:

Annuity plans let you save for the future and is one of the safest investment tools. While buying any of the annuity plans you will be informed about the same and is guaranteed for a living mostly.

Financial Security:

The time you buy an annuity plan, begins right from there, which again is guaranteed for life.

Flexibility in Payouts:

You have the flexibility to choose from an array of annuity options depending on what suits your requirements the most.

What are the Different Types of Annuity Plans?

Listed below are the following types of annuity plans in India 2020:

Deferred Annuity:

Under this, the money is invested for some period before payments are made. It can be chosen by individuals who are working and still have some years of work before retirement. It may also come with a “life cover”, which implies that in case of demise of the insured, the nominee is paid a lump sum amount.

Immediate Annuity:

In an immediate annuity, you start receiving payments as soon as the initial investment is made. If you are approaching retirement age, then this is the type of annuity to opt for. So, deferred annuity accumulates money while immediate annuity pays money.

You can convert deferred annuities into an immediate annuity if you want immediate payments.

Depending on the investment type, immediate annuities are further classified as fixed and variable. When the payout made to the customer is a fixed sum for a certain number of years, it is called a fixed annuity or annuity certain. In a guaranteed period annuity, the period for, which the payment will be made, is decided. Even if the policyholder dies, payments are made to the nominee for the remaining years. If the individual survives the tenure, they receive the payout for the rest of their life.

When the payout varies depending on the type of investment or market performance, it is a variable annuity.

Variable Annuity:

As the name suggests, within the variable annuity plans the payout is unfixed and it may accordingly vary from company to company. It happens as it completely is based on the market performance of the insurance company. Besides, the plan market-linked and is more risk-prone. It is to be noted that when the returns are good the payouts will most likely be on a higher side and vice versa

Fixed Annuity:

Within the fixed annuity plans the amount of payout is fixed for the complete period of the annuity plan. Moreover, the plan duration is too fixed. Therefore. Even after the demise of the insured, it is the nominee who will likely receive the fixed payout.

In the table below, are types of annuities based on the features and meeting the requirements by the certain annuitants:

Annuity Types The Variants
Premium Frequency Single
  Regular
Payout Types Variable
  Fixed
Initiation of Payout Time Deferred
  Immediate
Payout Duration Life Annuity
  Certain Time
People Benefiting Single Life
  Survivor/ Joint
Nature of Buyer Individual
  Group

Read Also: Annuity Calculator

How Does Annuity Plans Work in India 2020?

Annuity plans could be the best thing for your retirement period if you select the best annuity plan in India.

It takes a lot of effort to build a retirement corpus. Today many insurance companies in India provide annuity plans so that you need to depend on somebody else for your golden period and take burden in regards to the finance.

Therefore, it is indeed important to understand the working of the annuity plans in India 2020.

Listed below are the ways annuity plans in India 2020 work:

Life Annuity with Return of Purchase Price:

Until the time you do not pass away, you will be receiving the payments of annuity constantly at a specified interval of time. After which, the insurance provider would return the initial amount that was used while buying the annuity to the mentioned nominee. This might be considered a decent alternative by those who desire to leave legacy aftermath.

Joint Life Annuity with Return of Purchase Price:

Till the time the other half is alive the payments will be received at the constant frame of time. The initial amount of investment will be received by the nominee if either the spouse or both are no more alive.

Inflation-indexed Annuity:

With every passing year, there is a certain increase in the annuity rate, which could be 2% or even 5%. Possibly, it would not be connected to the rate of inflation, which is actual; however, the expenses will be taken care of up to a specified scope.

Joint Life Survivor Annuity:

It will be paid until you’re or the better half is alive.

Life Annuity:

One will be able to receive constant payout until one passes away. The annuity shall stop the day you are no more alive. The payout could be received on a monthly, quarterly, or annually.

Annuity Payable For a Guaranteed Phase:

The annuity to be paid will be for a specified time-frame, which could be from 5, 10 or even 15 years in case the buyer of the annuity passes away. The annuity will stop in case the annuitant is no more alive or the period of guarantee is completed accordingly.

When is the Right Time to Invest in Annuity Plans 2020?

Annuity plans are a long-term investment, which is issued by any of the insurance companies in India with the general intent of protecting you monetarily at the very important yet crucial phase of your life.

As such, there is no certain or specified right time to buy the best annuity plan in 2020. You can buy the annuity plan as early as possible like at the age of 45 or 50 years and start availing the benefits possibly.

Listed below are the ways to buy the best annuity plan 2020 in India:

Select the Right Type of the Annuity Plan:

It is essential to select an annuity plan on the premise of the age of retirement and the pay-out one wishes. For instance, one can choose between the immediate annuity and the deferred annuity. When it comes to an immediate annuity, the person will soon likely receive the payments post the investment is done initially. In case of a deferred annuity, the amount will be locked for specified times previous to the payments are done. Anyone who is about to retire may opt for immediate annuity and deferred annuity could be opted by those who have some years before the retirement period commences.

Select the Right Type of Annuity Option:

Most of the insurance providers provide different annuity alternatives to opt. The annuity options could vary from single life to a joint life. Besides, there are annuity plans, which offer flexibility wherein the annuity payouts yearly will increase. You can access the payouts accessible for any specific scenario and choose the best annuity plan in 2020 that is suitable and fulfils your requirements.

Extensive Research the Plan Features:

Before you zero down any of the annuity plans you need to understand the requirements and conduct thorough research on the premise of it. Look for plans that offer multiple benefits for you and your other half as well and accordingly opt for the payout method.

A right annuity plan will help you and your partner to live a contented life even after the retirement years.

Advantages of Annuity Plans

Now, let us have a look at the below-mentioned advantages, which are offered under any of the annuity plans apart from peace of mind:

No Cap of Investment:

When it comes to annuities plans there are as such no investment caps like we have an investment in case of Senior Citizens Savings Scheme and Post Office Monthly Income Scheme.

Removes Reinvestment Peril:

One of the biggest benefits that annuity plans offer is that there is absolutely no scope of any reinvestment risk. Structurally, in India, we are likely towards the interest rates, which are at a lower side; the peril is that when one desires to reinvest a principal, most likely you will end up receiving a rate of interest at a lower side. Besides, the short-term tools for example POMIS have reinvestment risk. However, when you invest in an annuity plan, it is assured that you will receive the payout for a lifetime.

Sense of Financial Security:

Annuity plan gives you the security in terms of finance for a life wherein you will receive every month. The insurance provider takes on the peril of how to move ahead with the monetary aspect until you are alive and not worry for the future. Moreover, one can opt for the frequency of the premiums and likewise opt to obtain payout, which is fixed out at a specified interval of time, which could be monthly, quarterly, semi-yearly or yearly.

Disadvantages of Annuity Plans

The annuity plans do offer guaranteed sum, which likewise provides stability and security to the retirees, however, it has certain disadvantages listed below:

Simple Interest:

The annuity plans use the simple interest whereas instruments like Senior Citizens Savings Scheme does use compound interest every quarter.

No Premature Withdrawal:

Annuity plans do not permit premature withdrawals. Premature withdrawals are allowed in investment instruments such as POMIS and SCSS. For instance, when it comes to an SCSS, you can withdraw the money after a year by making the payment as a penalty. Therefore, if you are looking forward to accessing the principal amount, an annuity plan will not be of much help nor will be a choice.

Low Rate of Return:

The returns on the annuity plans every year is not much attractive when compared to various other products, which likewise offers the low returns.

No Inflation Fight:

Most of the instrument plans do not combat inflation. Also, the increase in price is not restricted to the age of retirement or so. Therefore, it is prudent to contemplate the effect of inflation before one plan for retirement.

No Access to Capital:

In India, annuity plans are not an opulent instrument option as the citizens mostly want to avail capital, which is not possible in the case of an annuity plan. On the other side of the coin, when it comes to the POMIS, the investor will receive a capital post of six years.

Read Also: Present Value of Annuity

Eligibility Criteria of Annuity Plans

To avail the annuity plan on needs to be under the age group of 35 years to 75 years most likely. However, the age group may vary from one insurance company to the other.

Documents Required Buying the Annuity Plan

In the below grid, is the list of documents that might be required when buying the annuity plan:

Evidence of Age Evidence of Identity Evidence of Address Evidence of Income
Certificate of Birth Aadhar Card Aadhar Card Salary Slip
Driving License Voter ID Voter ID ITR Return Copy
Passport Driving License Driving License Statement of Bank
Mark Sheets (High Secondary) PAN Card Passport  
  Passport Ration Card  
    Utility Bills  

Note: The insurance providers might ask for a medical report if required. Of the above-mentioned evidence, one should be required to produce one from every category.

Best Annuity Plans of 2020-21

Regular and guaranteed income after retirement, tax benefits, choices of frequency of payout are some of the common benefits of all the best annuity plans in India. Mentioned below are unique features and benefits for some annuity plans:

  • BSLI (Birla Sun life India) Immediate annuity plan: You need not undergo a medical test to opt for this plan
  • Reliance immediate annuity plan: This is a single premium plan which allows you to leave some funds for your dependents. You have the option to convert your earnings into income.
  • HDFC Life New Immediate annuity plan: Choice of annuity options and death benefit
  • SBI Life annuity plus plan: Regular income from the age of 40 and option to add riders
  • ICICI Pru Immediate annuity plan: One-time investment with payout options for life;Joint life cover, last survivor option
  • Max Life guaranteed lifetime income plan: Applicants within 50-80 years of age can apply:
    • Available in single life annuity for life, with and without death benefits;
    • Available in joint life annuity for life, with and without death benefits
  • Aviva Annuity Plus: Option to receive higher annuity payout by enhancing purchase price during inception
  • Bajaj Allianz Retire rich plan: Option to change the premium paying term any time; -Guaranteed death benefits

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply.

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