Annuity plans are usually characterised by their low returns, lack of tax benefits and complex product structure. However, immediate annuity plans, which provide lifelong income benefits at monthly, quarterly or annual intervals, are a good fit for investors who value certainty over everything else.
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Annuity Plan in India
Immediate annuity plans in India are provided by the Life Insurance Corporation of India (LIC) and private sector life insurers like HDFC Life, MAX Life, Birla Sun Life and ICICI Pru Life.
LIC Jeevan Akshay 6 Plan
LIC Jeevan Akshay 6 Plan is a single premium immediate pension plan. It is a non-unit-linked pension plan. In this plan, a lump sum amount of the premium is paid to purchase the annuity that starts immediately without any delay.
An individual can select from six pension options under this plan. However, once an option is selected, it cannot be changed as the pension starts immediately without delay. Annuity may be paid in different time intervals, such as monthly, quarterly, half-yearly or yearly intervals. It begins from the next possible interval as selected.
Some of the key features of this plan are as follows:
- This plan is an immediate pension plan.
- There are six options available for pension, which are:
- Annuity for life: Here, pension is paid till the annuitant is alive and nothing is payable on death.
- Annuity guaranteed for specific periods: Here, pension is definitely paid for 5/10/15 or 20 years as selected whether the annuitant is alive or not and is paid as long as the individual is alive.
- Annuity with return of purchase price on death: Here, pen- sion is paid till the annuitant is alive and the remaining amount of the corpus is paid to the nominee as death benefit.
- Increasing annuity: Here, pension is paid till the annuitant is alive at an increasing rate of 3 per cent p.a.
- Joint life last survivor annuity (a): Here, pension is paid till the annuitant is alive. On the death of the annuitant, 50 per cent of the pension is payable to the spouse as long as the spouse is alive.
- Joint life last survivor annuity (b): Here, pension is paid till the annuitant is alive. On the death of the annuitant, 1000 per cent of the pension continues to be payable to the spouse as long as the spouse if alive.
- Annuity for life: Here, pension is paid till the annuitant is alive and nothing is payable on death.
- Annuity may be paid at certain time intervals, such as monthly, quarterly, half-yearly or yearly.
- There is an incentive for purchase of `Rs 1.5 lakhs of annuity or more.
Some of the major benefits of this plan are as follows:
Death benefit
In case of death of the annuitant, it entirely de- pends on the pension option selected. These options are as follows:
- Annuity for life: Pension ceases when the annuitant dies and nothing further would be payable to the nominee.
- Annuity guaranteed for specific periods:
- During the guaranteed period: Pension is paid to the nominee till the end of the guaranteed period after which it ceases.
- After the guaranteed period: Pension ceases when the an- nuitant dies and nothing further would be payable to the nominee.
- Annuity with return of purchase price on death: Pension ceases when the annuitant dies and the remaining amount is paid to the nominee.
- Increasing annuity: Pension ceases when the annuitant dies and nothing further would be payable to the nominee.
- Joint life last survivor annuity with 50 per cent pension for spouse: When the annuitant dies and the spouse survives, 50 per cent of the pension continues as long as the spouse is alive and ceases thereafter. Nothing further would be payable to the nominee.
- Joint life last survivor annuity with 100 per cent pension for spouse: When the annuitant dies and the spouse survives, 100 per cent of the pension continues as long as the spouse is alive and ceases thereafter. Nothing further would be payable to the nominee.
Maturity benefit
There is no provision for maturity benefit be- cause this is a plan to protect the risk of living too long. Pension is provided immediately according to the option selected.
Income tax benefit
Premiums paid under life insurance policies are exempted from tax under Section 80 C. Pension that is received is taxable.
HDFC Life Annuity Plan
HDFC Life New Immediate Annuity Plan is a non-linked traditional annuity plan that provides annuitants different annuity options and offers the individual an opportunity to live life on his/her terms even after retirement.
Some of the features of this plan are as follows:
- Guaranteed income as long as the partner of the annuitant lives
- Availability of different annuity options to cater to the annuitant’s diverse requirements
- Flexibility to select the duration of annuity from monthly/quarterly/half-yearly/annual options
Some of the advantages of this plan are as follows:
- Guaranteed income as long as the annuitant or his/her partner lives at a frequency of his/her choice, that is, monthly/quarterly/ half-yearly/annual options
- Benefit from higher annuity rates at an investment of `Rs 2,50,000 or higher
- Death benefit on specific annuity options that offer a return of purchase price or annuity to the annuitant’s spouse
Max Life Annuity Plan
The Max Life Guaranteed Lifetime Income Plan is a non-linked traditional annuity plan that guarantees a constant income source after the annuitant’s retirement. The minimum entry age (age at last birthday) for annuitants to be eligible under this annuity plan is 50 years while the maximum is 80 years. Annuity payment modes are annual, semi-annual, quarterly or monthly. Besides, there is no limit for both the minimum and the maximum purchase price.
The following are the various annuity options available under this plan
- Single life annuity for life (without any death benefit): A certain amount, guaranteed at the policy inception, will be paid to the annuitant throughout his/her life.
- Single life annuity for life with return on the premium payable on death: A certain amount, guaranteed at the policy inception, will be paid to the annuitant throughout his/her life. On his/her death, 100 per cent of the purchase price (excluding service tax) will be paid to the nominee of the annuitant.
- Joint life annuity for life (without any death benefit): A certain amount, guaranteed at the policy inception, will be paid as long as one of the annuitants is alive. Payments will stop when the last annuitant dies.
- Joint life annuity for life with return of premium payable on death of last annuitant: A certain amount, guaranteed at the policy inception, will be paid as long as one of the annuitants is alive. When the last annuitant dies, 100 per cent of the purchase price (excluding service tax) will be paid to the nominee of the annuitant.
The working of this plan is as follows:
- The annuitant selects a one-time lump sum amount that he/she will pay in order to buy this policy.
- The annuity amount that the individual receives will be dependent on the annuity rate applicable at the time of buying the policy. These rates are guaranteed for the annuitant’s lifetime and are only applicable after the policy is issued.
- The annuitant chooses any of the four annuity options available under this policy.
Birla Sun Life Annuity Plan
The Birla Sun Life Immediate Income Plan is a traditional, non-participating, single premium annuity plan with return of the buying price. This plan is applicable if the annuitant is at least 50 years old and not over 90 years old. Annuitants can buy this annuity such that they receive a regular income of Rs 1000, Rs 3000, Rs 6000 or Rs12000 monthly, quarterly, semi-annual or annual modes of annuity payment respectively. There is no maximum limit on the buying price.
The plan works as follows:
- The annuitant decides the amount of premium (lump sum amount) that he/she wants to pay to purchase the annuity on the basis of the amount of regular income he/she wishes to receive. This annuity payment is guaranteed for life and relies on the annuity rates prevailing at the time of the purchase of the annuity.
- The annuitant selects the annuity payout options from monthly, quarterly, semi-annual or annual mode.
- Thereafter, the annuitant selects the way in which he/she likes to receive the annuity from either post-dated cheques or through direct credit to his/her bank account.
Some of the benefits of the Birla Sun Life Immediate Income Plan are as follows:
- This plan provides the annuitant a guaranteed income over his/ her entire life.
- In case of death of the annuitant, 100 per cent of the annuity purchase price (that is, a single premium) will be paid to the nominee.
- This plan provides the annuitant convenient annuity payout options, that is, monthly, quarterly, semi-annually and annually from the date of purchase.
- The annuitant does not have to undertake any medical tests to buy this plan.
- The annuitant is eligible for tax benefits under Section 80C of the Income Tax Act, 1961.
ICICI Pru Life Annuity Plan
ICICI Prudential Life Insurance Company Limited offers annuitants the ICICI Pru Immediate Annuity Plan, which not only gives them an income for life but also offers them options to match their requirements.
This plan works as follows:
- The annuitant selects a one-time lump sum amount, which he/ she pays in order to buy this plan.
- Thereafter, the annuitant chooses any one of the five payout options, mentioned below.
- The annuitant selects from any of the four annuity payout modes, that is, monthly, quarterly, half yearly or yearly.
Through a lump sum investment in this plan, the annuitant begins receiving a regular income in the form of annuity. The actual amount of the annuity selected will depend on the annuity rate applicable at the time for buying the annuity. The annuity rates are guaranteed for the life of the annuitant. The annuity can be received in the monthly, quarterly, half yearly or yearly mode.
The different payout options available to the annuitant are as follows:
- Life annuity: This option provides annuity for life.
- Life annuity with return of purchase price: This option offers life annuity for the annuitant with return of purchase price on death to the beneficiary.
- Joint life, last survivor without return of purchase price: Here, the annuity is first paid to the annuitant. After his/her death, the spouse receives a pension equal to the annuity paid to the annuitant.
- Joint life, last survivor with return of purchase price: Here, the annuity is first paid to the annuitant. After his/her death, the spouse receives a pension equal to the annuity paid to the annuitant. After the death of the last annuitant, the purchase price is given back to the nominee.
- Life annuity guaranteed for 5/10/15 years and thereafter: Here, a guaranteed annuity is paid for the selected time duration, that is, 5/10/15 years and thereafter, the annuity continues as long as the annuitant is alive.
