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| Axis Nifty Midcap 50 Index Fund | +46.03% | Invest Now | Equity: Mid Cap | 0.28% |
“Annuities are critical in post-retirement financial planning,” says Aditya Mall, Appointed Actuary at Future Generali India Life Insurance. “They ensure a guaranteed income stream for the rest of one’s life and provide protection from the risk of exhausting retirement savings.”
Basically, an annuity is a contract with an insurance company where you pay a lump sum or a series of payments in exchange for regular payouts during retirement.
These payouts can begin immediately (in case of Immediate Annuities) or after a deferment period (Deferred Annuities).
There are also different structures. Fixed Annuities provide consistent income, while Variable Annuities tie returns to market performance.
Some plans cover two lives (joint-life annuities) or return the purchase price to nominees in case of early death.
“Annuities reduce uncertainty and provide peace of mind to retirees who want predictable income, especially those without a pension,” says Mall.
Weighing the options: Lump sum vs annuity
At the time of retirement, many individuals face the choice of taking out their retirement corpus as a lump sum or converting it into an annuity. This decision depends on several factors—financial needs, lifestyle goals, risk tolerance, and life expectancy.
“A lump sum offers flexibility and liquidity, but also brings the risk of spending the money too soon,” says Srinivas Balasubramanian, Chief of Product & Marketing at ICICI Prudential Life Insurance.
“An annuity, by contrast, ensures a steady stream of income for life, but limits access to large sums.”
Some plans do allow partial withdrawals in case of emergencies, but this often reduces future benefits.
A look at some of the available annuity plans list:
| Annuity plans list | |
| 1. | Aditya Birla Sun Life Immediate Annuity Plan |
| 2. | Aviva Annuity Plus |
| 3. | Canara HSBC Pension 4Life Plan |
| 4. | Exide Life New Immediate Annuity Plan |
| 5. | Future Generali Immediate Annuity Plan |
| 6. | HDFC Life Pension Guaranteed Plan |
| 7. | ICICI Prudential Immediate Annuity Plan |
| 8. | IDBI Federal Guaranteed Lifetime Income Plan |
(Source: Groww)
Pros and cons of annuity products
Pros:
- Guaranteed lifelong income: Reduces the risk of outliving savings.
- Low market risk: Fixed annuities are not affected by market volatility.
- Inflation protection options: Some products offer increasing payouts to offset inflation.
- Customisation: Options for joint life, return of purchase price, and deferral periods.
Cons:
- Lack of liquidity: Most annuity products lock in the investment with limited withdrawal options.
- Low returns: Compared to market-linked instruments, annuities may offer lower overall returns.
- Irreversibility: Once purchased, annuities usually can’t be changed or surrendered easily.
- Taxability: Annuity income is taxable as per the individual’s tax slab.
Planning early can make a difference
Deferred annuities, in particular, can benefit those who start early by locking in current interest rates and building a higher annuity corpus over time.
“Planning in advance and contributing regularly helps mitigate the impact of future rate fluctuations,” Balasubramanian adds.
However, experts advise evaluating one’s retirement goals, liquidity needs, and other income sources before committing to an annuity. Consulting a certified financial advisor can also help assess suitability.
