Annuity Plan in India

There is no maximum limit for purchasing an annuity; you can invest any lump sum, depending on the insurer’s minimum purchase requirement. The larger the investment, the higher the annuity income will be.

However, there is a minimum annuity amount, which differs from provider to provider. Insurers like HDFC Life permit flexibility in premium size, ensuring options for both small and large investors. The payout frequency can even be customised, i.e., on a month-on-month basis, quarterly, half-yearly or yearly.

You can purchase an annuity once you reach the age of 40 or 50. But the ideal age is generally close to retirement age (i.e., around 55–65 years). This ensures you lock in a steady income when your regular salary comes to an end.

Purchasing earlier might provide mental peace. But this could limit returns, as annuity payouts increase with age. The correct age depends on your life goals and whether you prefer immediate income or future security.

Purchasing an annuity is rarely "too late," but timing is crucial. While older customers can receive larger payments, they would also have fewer options or pay more in fees. To determine whether an annuity still offers value, consider your current assets, income requirements, and health. Whether it makes financial sense to buy at this point in your life might be determined by a professional evaluation.

Purchasing an annuity is very simple. You select an insurer, choose the annuity type (i.e., immediate or deferred), decide payout frequency (i.e., monthly, quarterly or annually) and invest in the form of a lump sum. Many insurers offer online annuity calculators to assist you in estimating your income before purchase. 

Once you make the payment of the premium, you begin receiving payouts according to the selected schedule. Documents like identity proof, age proof and PAN are generally required. Note that you must always strike a comparative analysis among plans to ensure the best fit for your retirement goals.

Yes. Annuities are well-matched for senior citizens as they endow an assured and lifelong income without any market risks. Retirees benefit from predictable payouts that assist in covering living expenditures, healthcare and emergencies.

Unlike savings accounts or mutual funds, annuities assure a steady income irrespective of economic conditions. They even reduce the stress of managing investments at an older age, offering mental peace along with financial security.

What happens depends on the annuity you select. In a life-only annuity, payments stop upon the death of the policyholder. In a return of purchase price annuity, the invested amount (i.e., purchase price) is given back to the nominee. 

A few plans even permit continued payouts to the spouse or beneficiary. It is essential to select an option that is in line with your family’s financial security needs.

Usually, annuities do not permit premature withdrawal as they are customised to provide lifelong income. However, a few plans might permit partial withdrawal under exceptional circumstances, such as critical illness or financial hardship. 

In most scenarios, once you invest, the money is locked, and you just get payouts as per the schedule. If flexibility is a priority, then it is better to check out the policy terms or consider alternatives like Unit-Linked Insurance Plans (ULIPs) or mutual funds.

There are four types of annuities:  

• ​​​Lifetime Annuity: Provides a lifetime fixed payout; these stop at the annuitant’s death.  

• Joint-life Annuity: Offers financial security to you and your partner for the rest of your lives. The payouts can be chosen on a monthly or an annual basis.  

• Return of Purchase Price: Combines the lifetime income stream with a principal safety net. So, in case of the annuitant’s death, the principal goes to the nominee.  

• Increasing Annuity: Enables the annuitant to fight inflation through a consistent payout increase over time. So, you can maintain the purchasing power of your investment.

If you miss out on paying the premium of your pension plan, you get a grace period of 15 to 30 days from your insurer. Ensure to pay the premium within this grace period if you want to continue the coverage. Missing premiums could lead to penalties and eventually policy discontinuation.