Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term

Protect Your family’s financial future with Kotak e-Term. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more


Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

How To Calculate The Present Value And Future Value Of Annuities?

Present value is the amount of money needed to generate a specific return. Future value is the balance an account will accrue over time. Here are how these values of annuity are calculated.

  • Nov 17, 2022

Any form of recurring or ongoing payment is known as annuities. In case of annuity plans, a policyholder generally invests a lump sum amount in receiving a steady income after retirement. In a way, this helps retirees continue receiving a type of salary even after they stop working.

But while annuity plans are popular for retirement planning, the amount one chooses to invest in the plan needs careful consideration. After all, this lump sum investment will determine the payouts policyholder will receive after retirement. Calculating the present value and future value of the annuity is the right way to begin.

Understanding the concept: Present and Future Value of Annuities.

What is an Annuity?

  • An annuity is a type of financial investment that provides regular payments for a specified length of time. It is typically obtained through an insurance firm or a financial services organisation in modern times.
  • This form of investment is frequently employed by persons preparing for retirement or a planned spell of unemployment. An annuity can yield either fixed or variable returns, depending on the investor’s decisions.

  • When you buy an annuity, the insurance company takes a large sum of money and invests it, minus any expenses. In exchange, the investor will get an agreed-upon sum of money at regular intervals over a set length of time.

Present Value of an Annuity

  • The present value of an annuity is the current worth of all future income generated by that investment. In more practical terms, it is the sum of money that must be invested today in order to earn a certain amount of money afterwards.
  • For example, if you wish to ensure ₹1,000 annual payments for ten years, the present-value calculation would be used to decide how much to invest today. To obtain a ₹1,000 annuity payment for ten years at 8% interest, you would need to invest ₹6,710.08 now.

Future Value of an Annuity

  • The future value of an annuity is the entire amount of money that will be accrued by making regular investments with compound interest over a given period of time.
  • Rather than preparing for a certain amount of income in the future by calculating how much must be invested today, this method forecasts the growth of savings over time.
  • The future-value calculation would be used to predict the amount of an investment account, including interest growth, after ten years of making ₹1,000 monthly instalments. Assuming interest rates of 8% (which is also the growth rate), the potential value after 10 years is ₹19,990.05.

Why Should You Calculate Present Annuity Value?

The present annuity value is the current worth of the annuity payouts that a policyholder will receive in the future, depending on the insurer’s guaranteed rate of return. In other words, it helps one know the lump sum amount that should be invested in order to receive the desired annuity payouts after retirement.

As the calculation is used to determine the value of future annuity payments, it also helps determine whether an immediate annuity or a deferred annuity would be the right choice for an individual. Note that the calculation is based on the concept of the time value of money, wherein it is believed that the money received today has a higher value than the same amount received in the future.

How to Calculate the Present Value of Annuity?

The formula for present value of annuity calculator is as follows-

PV = P * [1 - ((1 + r) ^(-n)) / r]

P: Periodic Payment,
r: Periodic Interest Rate,
n: Number of Years

Why Should You Calculate Future Annuity Value?

The future annuity value is the total value of recurring payouts paid to the policyholder at a specific future date and a fixed discount rate. In simpler words, this calculation will help you know the true worth of the payments you are making towards an annuity plan at a future date.

This can help you make smarter investment decisions and plan your retirement as per your financial objectives and goals.

How to Calculate the Future Value of Annuity?

Given a set interest rate, the future value of the annuity formula is used to measure how much a series of regular payments will be worth at some time in the future. So, if you plan to invest a certain amount each month or year, it will tell you how much you will have amassed at a later period. If you make regular loan payments, the future value might help you calculate the overall cost of the loan.

The formula for calculating the future value of an annuity is as follows-

FV of annuity = P * [((1 + r) ^(n)) - 1 / r]
P is the Periodic Payment,
r is the Periodic Interest Rate,
n is the Number of Years

Annuity Calculator- A Simpler Way to Calculate Current Value and Future Value of Annuity

If these formulas are too confusing for you, a simpler alternative is to use an online annuity calculator. Most of the top insurers have this tool available on their websites to make it easier for buyers to choose the right annuity investment amount as per their retirement objectives.

If you are still unable to decide after using the annuity calculator, it’d be wise to get in touch with the insurer to get all the assistance you need. As the amount you invest in an annuity plan will determine the future payouts, be very careful with the amount you select to ensure that you can live your retirement years exactly how you’ve always imagined.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

Kotak e-Invest

Download Brochure


  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521


- A Consumer Education Initiative series by Kotak Life

Similar Articles

Benefits Of Retirement & How Investments Can Help You Enjoy Them

How to Build a Tax-Free Pension Income for Retirement?

How Has NPS Performed in Comparison with Other Instruments?

Types of Annuity Plan | Annuity Definition - Meaning & Key Benefits

Why Should Retirement Planning Be on Top of Your Priority List?

Retirement Planning for Millennials

What is Premium Redirection in ULIPs Plans | ULIP Insurance Plans | Kotak Life Insurance

A Quick Guide to Retirement Plans

Know Why You Should Stay Invested in Your ULIP Plan

Single Premium ULIP or a PPF - Which One is Better?

Different Types of Retirement Schemes

Difference Between Unit-Linked Insurance Plans and Non-Linked Plans

What is Fund Value in ULIP?

What is an Annuity Plan, and How Does Annuity Plan Work?

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

What is the difference between Life Insurance and ULIP?

What is a Retirement Plan - What are its Features?

What are ULIPs and their Types?

What are the Benefits of ULIP - Explained

5 Notable Investment Options for Retirees

Pros and Cons of Retirement Annuities

What Are Superannuation Benefits?

यूलिप और उनके प्रकार क्या हैं?

What tax benefits are there on saving for retirement?

Getting Close to Retirement? Six Key Retirement Planning Tips That Can Help You Retire

Best Insurance Plans for a Guaranteed Monthly Income After Retirement!

Save Early to Keep Living Your Dreams Post Retirement

Is ULIP Better Than FD?

Is It Worth Buying ULIP Plans For 10 Years?

Advantages of Pension Schemes and Retirement Plans

How Does Pension Plans in India Works?

How should one decide on fund allocation within NPS?

A Beginner's Guide to Understanding 401k Retirement Plan

Understanding Annuity Plans

How to Win at Retirement Savings?

Is it Suggestible to Take a ULIP Plan Linked with a Term Plan?

Tips to invest your voluntary retirement scheme money

What is the Death Claim Payable in the Case of ULIP?

ELSS vs ULIP: Which is a Better Investment?

6 Signs That You Are Not Financially Ready For An Early Retirement

What Happens to ULIP Premiums Paid if the Market Crashes?

Top 6 Flexible Benefits That ULIPs Offer

How Much Corpus Does One Need for Retirement?

Looking for Ways to Earn Lifetime Income in Retirement? Here Are 6 of the Top Options

Terminologies You Should Understand About Retirement Plans

ULIPs or Pension Plans – Which is a Better Retirement Plan?

Top 4 Myths About ULIP Investments You Should Know

5 Common ULIP Myths That You Should Stop Believing

Is it Advisable to Withdraw the ULIP Insurance Policy After 5 Years?

ULIP Plan or Traditional Insurance Plans - Which is better?

Is ULIP a Good Option for People Above 60?

What To Do With Your Retirement Accounts During An Employment Lapse?

How Quickly is Fund Switch Effected in ULIPs? Is it Done the Same Day or After a Particular Number of Days?

What is the Estimated Return Percentage on ULIP? Do Investors Get Compound Interest?

Do Pension Plans Allow any Death Benefits?

Which Pension Plan Suits You best?

Invest for your second innings with a guaranteed savings plan

What are the Chances of Losing all my Money in ULIP and How Much Return Should I Expect?

Types of Retirement Plans

Is it possible to live a financially independent life, even after you retire?

Are Annuities Great For Early Retirement?

Top 4 Mistakes To Avoid While Planning For Your Retirement

Saving for approaching retirement with retirement insurance

Benefits of Early Retirement Plans

Different Types of ULIP Investments in India

What are the 4 Financial Phases of Retirement? How to Budget For Each One?

Is ULIP a Complex Financial Product?

Retirement Planning - How To Calculate Your Retirement Premium in India?

Un-Retirement - Are You Ready For It?

Why Should You start Retirement Planning as soon as you start a job?

What is the Difference Between EPF, VPF, and PPF? What are Their Tax Benefits?

What are Fixed Maturity Plans and Why Should I Invest in Them?

ULIP Tax Benefits: यहां निवेश करने पर मिलते हैं 5 बड़े फायदे

What are the Advantages and Disadvantages of ULIP?

5 Reasons to Buy ULIP for a Secured Financial Future

Who Gets the Benefit After the Maturity of ULIP: The Proposer or The Life Insured?

Benefits of Early Retirement Planning in India

Worried About Running Out of Money in Retirement? 4 Tips to Avoid This Crisis

Which Is Better: ULIP or SIP?

What are the Rules for Exit From NPS?

How Do Annuity Options Work In NPS

Retirement Planning Guide for Working Men and Women

At What Age Should You Start Your Retirement Planning?

Retirement planning with a systematic life insurance plan

ULIP: Can You Surrender ULIPs or Withdraw Money from It?

How can NPS help you save tax?

What is Partial Withdrawal in ULIPs?

FAQs on Taxation of ULIPs

Can NRIs Invest in ULIP Plans Offered in India?

Top 6 Reasons Why You Should Get A Pension Plan

7 Secrets that can Make Your Post-Retirement Phase Prosperous

Importance of Retirement Planning

Here's What Retirement Would Look Like 30 Years From Now

Calculating a Retirement Corpus that can Support Your Lifestyle

Types of Pension Plans for Your Retirement

What are the minimum and maximum investment in ULIP? Would the Whole Amount Insured in The ULIP Insurance be Invested in the Market?

What is Lock-In Period in ULIPs?

Ten Signs That You're Ready to Retire

Is ULIP A Good Investment Option?

5 Reasons Why ULIP Plans are One of The Best Retirement Planning Instruments

The Significance of Number 8,000 in Retirement Planning

Inflation: A Key Factor to Consider into Retirement Planning

Top Investment Options for Retirement Planning

What are the Differences Between ELSS ULIP and Mutual Funds?

8 Charges in ULIP That You Must Know

How To Keep Your Retirement Accounts from Being Hacked?

What is NAV in ULIP, and How is it calculated?

Demystifying the Retirement Planning Process

Importance of financial Planning for Retirement

Retirement Planning Guide: These 5 Steps Will Help You Towards a Safe, Secure and Fun Retirement

EPF Grievance Management: All You Need to Know

Are You Planning an Early Retirement? Here's Why Buying Annuity Plan Will Make Sense

Does Having Both ULIP Plan and Other Health Insurance Plan Make Sense?

How Safe is it to Invest in ULIP plans?

10 Steps to Figure Out How Much Money You Will Need After You Retire

How To Make Most of Your Money After Retirement?

NPS for Housewife

Retirement: A New Start to Life!

What are the Charges Levied on ULIP?

Important Questions To Ask Yourself Before Choosing A Good Retirement Plan

Retirement Planning at 50? You Are Still Good to Go

What are the things to consider before buying ULIPs?

What is the Minimum Lock-in Period for ULIP?

Do ULIPs Give Good Returns On Investments?

Give Your Retirement Savings A Booster-Shot with Annuities

Annuity Plan | How to Choose the Right Annuity Plan | Kotak Life

What Are Mortality Charges In ULIP?

Long Term Investment Guide for Your Retirement

10 Steps to Figure Out How Much Money You Will Need For Your Post Retirement Plans

Meaning of Sum Assured in a ULIP

What are the Uses of ULIP?

Can I Surrender My ULIP Policy after 2 Years?

What is a Defined Benefit Plan and How it Works?

How has ULIP Grown Over the Last 3 years?

How To Choose The Right Pension Plan?

Is the ULIP Policy Surrender Value Taxable?

What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?

Retirement Planning: Use our Retirement Calculator to Plan Ahead

How Does NPS Work?

यूलिप के 8 शुल्क

What are the Instruments Available for Building a Retirement Corpus?

What Are Retirement Pension Plans?

Why You Should Invest In An Annuity Plan?

How Can ULIPs Help You Plan for Your Child's Future?

5 Steps to Gift a Smart Retirement Plan to Your Parents

How Can I Achieve My Wealth Goal with ULIP Investment?

5 Retirement Planning Tips for a Financially Controlled Post-Employment Life

How Does ULIP Work in India?

Retirement and Pension Plans in India- What are Your Options?

Why Should You Invest in NPS?

Why ULIP Should Be a Part of Your Investment Portfolio?