Annuities are Insurance Investments that help build financial security during the post-retirement period. The principle of Annuity is that you build series of income for future from the present income by investing on the periodical basis. Annuities necessarily are the pension plans covered by Life Insurers.
Types of Annuity
Under Fixed Annuity Plans, there is the guarantee of principal amount and fixed earnings. The payment expected from these annuities is certain for a period of time chosen, which may be until death or a fixed period.
Variable Annuities provide the option to choose the investment plan ranging from fixed accounts and bonds to volatile market investments. The intention is to leverage market returns while remaining safe with the fixed proportion of investment portfolio.
An Immediate Annuity Plan ensures Income immediately. The policy is purchased with lump sum considering the withdrawal of returns immediately. Immediate Annuities are among the popular annuity plans in India.
Type of Annuity Plans
Annuity Plans have been rationalized over time and different elements have been put together to ensure that the plans suit the needs of an annuitant. However, we can enumerate some Basic Annuity Plans for the purpose of classification.
· Life Annuity– It is a contract to be valid until the end of life.
· Life Annuity with Return of Corpus- Fixed Pension amount is paid to the Annuitant until the end of his/her life Plus the principal or purchase amount is paid to the nominee.
· Annuity Guaranteed for 5, 10, 15, 20 years- It assures the payment of guaranteed pension amount to the annuitant during the period of time opted for. In the event of the death of annuitant in between, the equivalent pension amount is paid to the nominee.
· Annuity Guaranteed for 5, 10, 15, 20 years and life thereafter- In this case, guaranteed pension amount is payable to the annuitant for the above period and till life if the annuitant survives this term.
· Life Annuity with Joint Life, Last Survivor- the Guaranteed amount is paid to two annuitants until the end of their life.
· Life Annuity with Contingent Survivor– Like normal pension plan, the annuitant gets the pension amount till he is alive and thereafter the same is received by the spouse till his/her life.
Since Annuities are fixed income plans locked in for a particular period of time, their liquidity is subject to policy terms and conditions Not all annuities can be liquidated. Whereas there are some of them that can be liquidated with surrender penalties and some others with no surrender penalty. These options have been developed over a period of time to encourage Annuity Investments by overcoming the rigidity offered by initial basic plans.
Annuity Pension Plans
1. LIC’s Jeevan Akshay VI
This is Immediate Annuity Plan and includes the features of guaranteed payout, guaranteed payout with a return of purchase amount, pension extension to a spouse, etc. The minimum purchase price is INR 100, 000 @ 3% increased rate of interest.
2. HDFC Life New Immediate Annuity Plan
This plan has features similar to above.
3. LIC’s New Jeevan Nidhi
This is a traditional plan with bonus declared after a certain number of years. It provides for death cover during the term and offers annuity on survival to the date of vesting.
4. SBI Life Annuity Plus
This is traditional immediate Annuity Plan that offers annuity payout from age of 40, lifetime annuity payout for principal annuitant and spouse, the return of premium or balance premium and SBI –Life Accident Death Benefit Rider as special features.