Immediate Annuity Plan

An Immediate Annuity Plan is an investment option designed to provide a steady income stream immediately after a lump sum payment or premium. It offers security and stability by converting a lump sum into regular payouts. This makes it an attractive option for retirees or individuals seeking lifelong guaranteed income starting immediately.

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What is an Immediate Annuity Plan?

Annuity plan is defined as a scheme that provides you with a regular payment for life against lump-sum or monthly payout amounts to the insurance provider. 

An Immediate Annuity Plan is a type of annuity contract where an individual makes a lump-sum payment to an insurance company. In return, the insurance company makes guaranteed regular income payments to the individual almost immediately. The income can start as early as 1 month from the policy issuance, based on the annuity frequency (monthly, quarterly, semi-annually, or annually) selected in the annuity contract.

Features of Immediate Annuity Plan

The key features of this best investment plan for retirement planning are listed below:

  • Lump-Sum Payment: You invest a one-time, upfront amount (premium) to purchase the annuity.

  • Immediate Income: You start receiving payouts as soon as you invest your money, unlike deferred annuities, where income begins at a later date.

  • Guaranteed Income:  The insurance company guarantees the income stream for your lifetime (or a chosen period), protecting you from the risk of outliving your retirement savings.

  • Payout Options: You can choose how you want to receive your income, such as monthly, quarterly, semi-annually or annually. 

  • Death Benefit:  Immediate annuity plans offer flexibility to choose between with or without Return Of Premium (ROP) option. 

    • Without Return of Premium (ROP) Option: The annuitant receives a higher pension amount but on death no death benefit is provided to the nominee.

    • With Return of Premium (ROP) Option: Tthe nominee receives the entire premium amount as death benefit, in case of death of the annuitant

  • Optional features:  Some of the immediate pension plans offer additional features like:

    • Joint-life Annuity: Extends payments to your spouse after your death. The pension amount continues till any one of the annuitant is alive.

    • Increasing Annuity: Increases your income payout over time to keep up with inflation.

  • Potential tax benefits:  The best immediate annuity plan offers tax benefits under Section 80C of the Income Tax Act, 1961.

Illustration of Best Immediate Annuity Plans in India in 2024

Let us suppose you buy an immediate pension plan from Policybazaar as per the following conditions:

  • Your Present Age= 60 years

  • You Pay For= One Time

  • Starting Pension= Now (next month)

  • Plan Type= Annuity Plan

  • Specifications= Pension + Return of Purchase Price (ROP)

The list of best immediate annuity plans as per your financial planning are listed in the table below:

  • Max Life Smart Guaranteed Pension Plan

  • HDFC Life New Immediate Annuity

  • Tata AIA Saral Pension

  • Bajaj Allianz Guaranteed Pensin Goal

  • ICICI Pru Guaranteed Pension Plan

  • Tata AIA Fortune Guarantee Pension

  • Kotak Life Lifetime Income Plan


Benefits of Buying an Immediate Annuity Plan

Immediate annuity plans can be a good option for people looking for a secure income stream in retirement. Some of the key benefits of a pension plan are as follows:

  • Guaranteed Income: You receive a guaranteed income immediately after purchasing the annuity plan, providing financial stability.

  • Lifetime Payments: The annuity can be structured to provide payments for your entire life, ensuring you will not outlive your savings.

  • No Market Risk: Unlike investments in stocks or bonds, immediate annuities are not affected by market fluctuations, providing a stable source of income.

  • Predictable Returns: You know exactly how much you will receive in payments, making it easier to plan your budget and financial future.

  • Protection Against Reducing Interest Rates: The annuity rate is fixed for your entire life and does not change with dropping interest rates of other guaranteed instruments

  • Tax Advantages: Depending on the type of annuity plan, you can avail of tax deductions of up to Rs. 1.5 lakhs p.a. on premium paid under Section 80CCC of the Income Tax Act. 

  • Simplicity: Immediate income plans are straightforward and easy to understand, making them a convenient option for retirement planning.

  • Customizable Options: You can choose from various payout options and features tailored to your individual needs and preferences.

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: 

  • Provides Lower Liquidity: Annuity purchase is irreversible as the surrender value is low. However, certain insurers provide an option to avail loan against policy to solve your liquidity concerns.

  • Judiciously Customize Your Plans: You should ensure you choose the option of single life or joint life, with or without ROP while purchasing the policy. Once purchased the same cannot be altered.

  • You may explore potential tax benefits: You are entitled to tax deduction up to Rs 1.5 Lakh in conjunction under Section 80CCC of the IT Act, 1961. However, income received as pension is taxable as per the prevailing income tax slab. 

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

Choosing the right time for investment varies 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. 

Immediate Vs Deferred Annuity Plan

The following table highlights the key differences between an immediate pension plan and a deferred annuity plan:

Aspect Immediate Annuity Plan Deferred Annuity Plan
Payment Timing Begins immediately after lump sum payment Payments start at a later chosen date
Lump Sum Payment Typically required upfront Can be made upfront or gradually like a systematic investment plan
Accumulation Period No accumulation period Accumulates funds over a specified period
Retirement Age Suitable for immediate retirees Suitable for those planning for retirement
Tax Implications Taxed on income received immediately Tax is deferred till the pension begins
Flexibility Limited flexibility in payment timing More flexibility in choosing start date/payment
Income Security Provides immediate, steady income stream Income stream begins at a chosen future date

Bottom Line

Immediate annuity plan guarantees the assurance of regular payouts starting immediately after investment, offering financial stability and peace of mind. By weighing factors such as payout options, inflation protection, and beneficiary considerations, individuals can tailor immediate annuity plans to suit their specific needs and goals. Overall, immediate annuities serve as a valuable tool in retirement planning, offering simplicity and security for those looking to secure their financial future.


  • What is an immediate annuity plan?

    An immediate annuity plan is a financial instrument designed to provide you with a steady stream of income right away, in exchange for a one-time lump sum payment you make upfront.
  • Are immediate annuities a good idea?

    Immediate income plans offer guaranteed income for life but come with a few drawbacks:
    • Pros: Steady income, secure (backed by the insurer), and potential tax benefits.

    • Cons: Less flexibility (limited access to principal but offers loans against policy), and lower growth potential (fixed payouts)

  • What is the age for an immediate annuity plan?

    There's no minimum age requirement mandated nationwide in India for purchasing an immediate annuity plan. However, insurance companies typically set their own eligibility ages, which generally start around 30 years old.
  • What is a good rate for an immediate annuity?

    There is no single "good" rate that applies universally to immediate annuity plans. The payout rate you receive depends on several factors, including:
    • Your age: Generally, the older you are, the higher the payout rate you'll be offered.

    • The amount you invest: Larger lump sums often qualify for slightly better rates.

    • The type of annuity you choose: Some annuity plans offer features like a return of purchase price upon death, which can affect the payout rate.

    • Current interest rates: Annuity payouts are based on prevailing interest rates, so they can fluctuate over time.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
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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.

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