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

Your post-retirement years are for you to live a stress-free life. If planned correctly, you will not need to worry about taking care of your financial needs. There are a lot of financial plans available out there, that help you in your retirement years. One of the effective products for taking care of your financial needs in your post-retirement life is an annuity plan.

What is an annuity plan?

An annuity plan is simply a chain of periodic payments that are made in a time interval. Hence, the payouts will work as a regular source of income. An annuity plan is an easy way of creating your financial net for your retirement. It is considered a form of insurance, instead of an investment alternative. If you wish to get an annuity plan, you must read up on the types of plans. Depending on your needs and requirements, you can select from the different annuity plans available.

Different types of annuity plans and their key benefits in India are:

1. Immediate Annuity:

In an immediate annuity plan, the premium for the policy is paid in a lump-sum and not through multiple, regular payments. This plan will help you get the payout as soon as the first investment is made. Additionally, you will get guaranteed payouts at regular time intervals.

• Optimal for individuals who are close to their retirement age and are looking for immediate guaranteed income.
• You can defer taxes until late in your retirement.

2. Fixed Annuity:

In this plan, the payout is the same for the entire time period of the plan. The duration of the plan is also fixed. Hence, even after the policyholder’s demise during the tenure, their beneficiary or spouse will keep receiving the payout. The funds from this plan are invested in fixed income instruments.

• Preferred as pension payout as it offers guaranteed income to policyholder.
• Payouts remain constant for the entire tenure of the plan

3. Lump-sum Annuity:

While some annuity plans offer payouts at regular intervals for a specified time, some plans provide a lump-sum payout option. However, this plan is an alternative and is accessible only at a specified period.

• Can help take care of emergencies that require massive financial help.

4. Variable Annuity:

A variable annuity is a plan designed to provide variable annuity payouts throughout the plan tenure. The payout is not prefixed like the other types of annuity plans. The money is invested in mutual funds, and the return will depend on the performance of the fund the money is invested in.

• The payouts will be high when the returns are good.

5. Deferred Annuity:

In the deferred plan, the policyholder’s funds are invested for some period before the payments are made.

• Optimal for individuals who are still in the workforce and have some years left before retirement.
• Can use the accumulated funds to purchase an annuity at the time of retirement.