Immediate Annuity Plan

Financial planning essentially covers your retirement to help maintain a comfortable independent lifestyle after you have ended an active working life. After retirement, a steady guaranteed income stream is the primary objective of retirement planning for those who do not benefit from a post-retirement pension, like government employees. Retirement planning can transform your retired life into a golden period free from concerns about your healthcare needs and an uncompromising lifestyle.

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Additionally, a suitable plan in India can propel you ahead of inflationary trends to a peaceful existence. You have to create a corpus in the long term during your productive years so that a similar income stream substitutes your steady in the form of an immediate annuity plan.

What is an Immediate Annuity Plan?

The annuity plan is defined as a scheme that provides you with a regular payment for life against a lump-sum amount invested with the service provider. In India, the simplest annuity is the insurer’s retirement/pension plan, which helps build the required corpus to invest and pay you back through the returns. In a nutshell, an annuity is a contract between the insurer and the policyholder, wherein the latter makes either a lump-sum payment or installments. A regular income stream commences immediately after paying the lump-sum amount, as in immediate annuity plan, or at a mutually agreed upon specific prospective date, usually after retirement. Before delving deeper into the immediate annuity plan details, let us find the different types of annuities available in India.  


  • You purchase a non-participating non-linked plan by paying a lump-sum amount.
  • You determine your retirement age starting from as low as 40 years 
  • Choose the regular income stream intervals suiting your convenience
  • Start receiving the benefits immediately after investing the requisite amount 
  • You can choose the joint life option to cover your spouse in your absence
  • The return of purchase price option ensures that you leave a legacy for your descendants

Why should you buy an Immediate Annuity Plan?

Now that there is clarity on the annuity plans in general and the immediate Annuity Plan, let us find out how you will benefit from the selected plan.

  • You can enjoy financial freedom post-retirement benefiting from the chosen regular income stream during your lifetime. 
  • You are empowered to design the annuity’s contour with the retirement age, pension quantum, and the type of annuity to match your preferences. 
  • You have the flexibility to choose a joint cover and a legacy option to benefit your grandchildren. 


The immediate annuity plan is the most basic form of annuity in the Indian market, yet it is laced with a host of features to benefit you. Some of the key ones are:

  • You pay the lump-sum  premium only once 
  • You get a guaranteed regular income stream immediately upon investment
  • You can cover your spouse to receive the benefit in your absence
  • You get multiple options to fine-tune your plan like Joint, Fixed tenure, etc. meeting your specific needs 
  • You can tap the potential tax benefits under the extant laws 

Points to Consider while Purchasing an Immediate Annuity Plan

You must essentially survey the market for the various immediate annuity plans on offer to make an informed choice that best suits your needs. It is also sensible to look for additional features and benefits like inflation protection. You must also consider the following essential points before you commit to a particular plan: 

  • The decision cannot be reversed: The annuity purchase is irreversible and is highly illiquid. Evaluate your needs thoroughly before purchasing.
  • Select your convenient payout judiciously: You have multiple options on the platter. Choose one that suits you best with minimal risk for a steady income stream.
  • The payment is contingent upon your chosen term: It makes sense to choose a suitable term to receive a guaranteed monthly payout regardless of how long you live.
  • Forget about the liquidity of your investment: Your immediate annuity plan is locked, and you do not have the option to encash in a financial emergency. 
  • You may explore potential tax benefits: You are entitled to tax deduction up to Rs 1.5 Lakh in conjunction with other exemptions under Section 80C for periodical pension or annuity receipts under Section 80CCC of the IT act, 1961. However, income received as annuity payments is taxable under extant laws. 

How does it work?

  • Life Annuity: You will continue to receive your annuity payments in the defined frequency until you are alive. The payment ceases on your demise. 
  • Joint Life with Survivor Annuity: since you and your spouse are covered jointly, you will receive the benefits during your lifetime and your spouse after that until she survives. 
  • Life Annuity with Return of Purchase Price:  The annuity benefits will cease after your demise, and your descendants will receive the annuity purchase value.
  • Joint Life with Survivor Annuity and Return of Purchase Price: After your lifetime and subsequent demise of your spouse, the annuity purchase price is returned to your descendants.
  • Life annuity Guaranteed for 5/10/15 Years: The annuity payout continues for the defined term even if the annuitant expires. The annuity payment stops on completion of the term.
  • Inflation-Indexed Annuity: It is specifically designed to absorb the upwardly mobile inflation rates by an annual increase in annuity payout. It may not cover the inflation-induced rise but offsets it substantially.   

Right Time to Choose the Plan

The decision to choose the right time is best handled on circumstances as they vary from person to person. The critical question you must answer is when do you intend to retire? Building the corpus is a long-drawn affair, and as the saying goes – it pays to start early. Your corpus health will determine the type of lifestyle you have gifted yourself for your golden years. Dedicated retirement planning is crucial to cover your financial needs after your active working life ends. You and your spouse can lead a peaceful, independent life backed by the steady income stream you have ensured through your immediate annuity plan. 

How do you choose between Immediate and Deferred Annuity Plans?

The two popular Indian annuities are distinguished from each other by the annuity payouts commencement. As already seen, you start receiving annuity payouts in a steady stream in the immediate annuity plan as soon as you purchase. On the other hand, your deferred annuity plan commences the income stream at a mutually decided future date. The crucial element that clinches the issue in favour of one or the other is your age. If you are close to your retirement or just retired, an immediate annuity plan is tailor-made for you. Contrarily, if you are young, you may prefer to choose the deferred annuity plan. 

Bottom Line

The second innings of your life post-retirement is an important milestone. You can enjoy the fruits of your toil during your working life if you have planned well in advance to lead your retired life the way you want. Your life quality in your twilight year’s pursuit in hobbies, a business, or spend serene leisure amid your loved ones is supported by a regular income stream. Your immediate annuity plan can be the gift that will ensure your independent financial existence in your desired lifestyle.

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