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What Is An Immediate Annuity Plan?
Under an immediate annuity plan the policy holder pays a lump sum amount as a premium to the insurance Company. The Company starts making the payouts to the policyholder almost immediately. This may be within a month or within a year after the insurance policy is purchased. The payouts may be made based on the category of immediate annuity plan. Let us consider Mrs Sonia purchases an Annuity Certain policy by paying a lump sum amount of money of INR 10 Lakhs .The insurance Company starts making the payouts to Mrs Sonia within the period of a month. She gets INR 7500 per month or an annual payout of INR 90000. The payout is INR 13.5 Lakhs for a period of 15 years inclusive of interest in the annuity certain policy. Let us consider Mr Shah 53 Years of age takes up a Guaranteed Period Annuity Plan where Mr Shah pays a lump sum amount as a premium. The insurance Company starts paying out the amount for a fixed period of time almost immediately. Mr Shah has taken the policy for a period of 8 Years. So What Happens If Mr Shah Dies After 4 Years? The Insurance Company makes the fixed payments to Mr Shah for the 4 Years he was alive and the series of fixed payouts continues for another 4 years ,the payouts being made to Mr Shah's nominee. The rate of return offered is in the range of 7-8%.
What Is A Life Annuity Immediate Plan?
Under a Life Annuity Plan the policy holder gets regular payouts throughout his life. This policy ceases the payouts on the death of the policy holder and no payments are made even to the nominee. No medical examination is required for this policy. The minimum entry age of the policy holder is 30-32 Years and the maximum age is 80-85 Years. The minimum entry amount is INR 1-1.5 Lakhs per annum. There is no upper limit to the amounts that can be invested in these policies. One also has heard of an Annuity plan with Return Of Purchase Price .The payouts are made to the policyholder and on his death the remaining amount is paid to the nominee. One also must have heard of the Life Annuity Without Return Of Purchase Price where the policy holder gets regular payouts only until his death. The rate of return is around 7% for an entry age of 40 Years and can go as high as 11-12% for an entry age of 60 Years. This policy is suitable for a person who has no dependents. One also has heard of the Joint Life Last Survivor Annuity With 50% Pension For Spouse where on the death of the policy holder 50% of the payout amount is paid to his spouse until her death. Similarly one has Joint Life Last Survivor Annuity With 100% Pension For Spouse where on the death of the policy holder his/her spouse gets 100% of the payout amount until death. No tax needs to be paid on the return earned on the principal amounts.
The Table Shown Below Shows The Payouts Per Annum Made On a Lump Sum Amount Of INR 1 Lakh
| Age Of The Policy Holder (Years) | Life Annuity Plan | Life Annuity Plan With Return Of Purchase Price(INR) | Joint Life Last Survivor Annuity With 50% Pension For Spouse(INR) | Joint Life Last Survivor Annuity With 100% Pension For Spouse(INR) | ||||||
| 30 | 7000 | 6800 | 7000 | 6900 | ||||||
| 40 | 7500 | 6900 | 7300 | 7100 | ||||||
| 50 | 8000 | 7000 | 7700 | 7400 | ||||||
| 60 | 9000 | 7100 | 8600 | 8000 | ||||||
| 70 | 12000 | 7200 | 10500 | 9300 | ||||||
| 80 | 17500 | 7400 | 14500 | 12300 | ||||||
What Is The Deferred Annuity Plan?
In a deferred annuity plan the policy holder has to build a corpus which is used to purchase an annuity plan. This is done through a series of regular premium payments to the insurance Company up to a particular point of time. On maturity the accumulated money is used to purchase an annuity plan. The deferred annuity begins with the payment of the first premium in a series of premium payments or the lump sum amount paid. On maturity one can choose between a fixed payout across ones entire lifetime or for a specified time period. Deferred annuity plans are tax deferred. Until payouts are received by the policy holder no tax is applicable.
What is Meant By A Fixed Annuity Plan?
This is mainly divided into two parts. The fixed immediate annuity plan and the fixed deferred annuity plan. The investment corpus given to you to purchase an annuity plan will be made in fixed income securities or debt securities. This provides a guaranteed steady income irrespective of the market conditions as the financial instruments in which the corpus is invested are extremely safe.
What is Meant By A Variable Annuity Plan?
Under these kinds of plans the investment corpus paid out to you on retirement is made in market linked securities mainly equity instruments. These are considered extremely risky but give high rate of returns. Under an immediate annuity variable plan the returns will fluctuate with the conditions in the market which makes it impossible to guarantee a fixed monthly rate of return. Some months the payout of these plans will be high and in some months the payouts will be low.
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