An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You get a fixed amount of money for the rest of your life in return for a lump sum payment or a series of instalments.

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Features of annuity

Below are some of the key features of an annuity plan:

1. Safe investment option

Annuity plans are low risk plans that are not market-linked. The amount you receive is guaranteed1 and is fixed at the time of the purchase of the plan

1T&Cs apply

 

2. Financial security

Annuity plans provide you with an income for life. This helps you stay financially independent during your retirement

3. Flexibility

These plans offer you the flexibility to choose how you want to receive your income. You can choose to receive the income from the plan monthly, quarterly, half-yearly or yearly. Some annuity plans also offer you the flexibility to pay your premiums monthly, half-yearly, yearly or all at once as per your convenience

 

What are the different types of annuities?

There are two types of annuities:

Immediate annuity plans

There is no accumulation phase and the plan starts working right from the vesting phase. It is purchased with a lump sum and the annuity payment starts immediately either for a limited tenure or lifetime.

Deferred annuity

These are the pension plans in which the annuity starts after a certain date. It can be further divided into the following:

The annuities may also vary basis the type of payout you receive:

Fixed Annuity

Simply put, an annuity plan that gives you a guaranteed1 amount throughout the tenure of the policy is a fixed annuity plan. This guaranteed amount is pre-decided at the time of purchase of the policy. The amount paid to you is guaranteed. It does not get affected by market fluctuations.

1T&C Apply

Variable Annuity

In a variable annuity plan, your premiums are invested in instruments, such as mutual funds or equities. Payouts from such plans depend on the performance of the fund your money is invested in. If the fund performs well, you will get greater returns and vice versa.

     

  • Accumulation phase- It is the phase when you start investing and accumulating cash and commences from the date when you first time pay premium.
  • Vesting phase- It is the date from which you will start getting the policy benefits in the form of pension.

Benefits of Different Types of Annuities

Below are the benefits of the different types of annuity plans. This can help you decide the right option for your financial needs.

Benefits of Immediate annuities

  • Guaranteed1 income stream: Immediate annuity plans provide you with guaranteed1 income for your retirement. This helps you stay financially independent during your retirement
  • Immediate payouts: Immediate annuity plans offer guaranteed payouts immediately after purchasing the plan. If you need your income to start immediately, these types of annuity plans can be a suitable option for you
  • Protection against market volatility: Immediate annuity plans are not affected by market fluctuations. They offer a fixed payout
  • Tax* benefits: Immediate annuity plans offer you tax* benefits on the premiums paid under the policy under Section 80C of The Income Tax Act, 1961

1T&Cs apply

Benefits of Deferred annuities

  • Tax-deferred growth: Deferred annuities allow for tax-deferred growth on earnings. Your returns are not taxed until you make withdrawals. This helps you push the tax burden to a later stage in your life
  • Tax* benefits: Deferred annuity plans offer you tax* benefits on premiums paid under the policy under Section 80C of The Income Tax Act, 1961
  • Guaranteed1 income stream: Similar to immediate annuity plans, deferred annuities also provide guaranteed1 income for your retirement. They offer you a stable source of income for your post-retirement goals and help you stay financially independent during retirement

1T&Cs apply

How do different types of annuities work?

Annuities provide you with a regular income during your retirement throughout your lifetime. They offer various options to choose from, to suit your retirement needs. Here is how they work:

Life annuity

You will get regular (monthly/quarterly/yearly) annuity payouts from the scheme till you are alive. The annuity stops after your death.

Life annuity with return of purchase price

You will continue receiving annuity payments regularly until you die. After that, the insurer returns the initial amount, which was used to purchase the annuity, to your nominee. It is a good option for those who want to leave a legacy behind.

Annuity payable for a guaranteed period

The annuity is to be paid for a guaranteed period, say 5, 10 or 15 years even if the annuity buyer dies. Annuity stops either on the death of the annuitant or completion of the guaranteed period, whichever is later.

Inflation-indexed annuity

Every year, there will be a rise in the annuity payable at a certain rate, say 2% or 5%. Though it may not be linked to the actual inflation rate, the rationale is that it would take care of the increase in expenses to some extent.

Joint life survivor annuity

It keeps paying till either you or your spouse is alive.

Joint life annuity with return of purchase price

It keeps paying till you or your spouse is alive. In the case of the death of both, the nominee is entitled to get the initial invested amount.


Who should buy an Annuity plan?

If you want a guaranteed1 income for life, especially post-retirement, you should consider buying an annuity plan. The objective of an annuity plan is to ensure financial freedom during your retirement, when your regular income stops. You can use the payout from an annuity plan to cover your day-to-day expenses during retirement and to fulfil your post-retirement dreams, such as travelling, starting a venture, pursuing a hobby, and more.

1T&C Apply

 

What is the best time to buy an annuity plan?

Annuity plans provide you with the flexibility to start investing as per your convenience. If you are nearing retirement, you may have a large savings amount that you may want to invest. Some annuity plans provide you with the option to invest a lump sum and start receiving the income as early as the year following the purchase of the plan. You may also choose to receive the income at a later age.

If you are in your early earning years, you may want to invest smaller amounts towards your annuity plan regularly. Some annuity plans provide you with the option to invest regularly and receive income at a later age for your retirement. This enables you to invest small amounts, thereby making it easy on your pocket. It is important that you start investing in an annuity plan as early as possible.

Benefits of Annuity plans

a) Lifetime source of income

One of the key features of an annuity plan is that it provides a regular income throughout your life, even after retirement.

b) Multiple options to choose from

This offers you the flexibility to opt for a plan that suits your requirements. You may choose the single life option to get income for life, or the joint life option to cover your spouse as well. You may also opt to get the purchase price back after a certain period. Annuity plans provide multiple such options that help you customise the plan as per your needs.

c) Tax beneifts*

The premium you pay at the time of purchase of the plan is allowed as deduction up to ₹ 1.5 lakh under Section 80C of the Income Tax Act, 1961.

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What is Surrender Period?

The surrender period starts right after purchasing an annuity plan. During this period, you cannot withdraw your funds from the plan. If you try to withdraw your money before the surrender period ends, you will likely pay a penalty.

Typically, surrender period for annuity plans can be between 6 to 8 years. This can, of course, be different depending on the nature of policy chosen and the insurer. Once the surrender period ends, the policyholder can surrender the policy in full or in part and get back the asset value of the policy without attracting any surrender charge.

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✅ When can you withdraw money from an annuity?

Money can be withdrawn from an annuity under certain special conditions. Firstly, some annuity plans allow withdrawal if the policyholder is diagnosed with a specified critical illness. Secondly, some annuity options return whole or part of the original purchase to the nominee after the demise of the policyholder.

✅ How much income does an annuity payout on average?

The income from an annuity payout can depend on a number of factors, such as the amount of money invested, the policy term, the type of annuity, the chosen payout option and your age, among other things.

✅ What are the most popular types of annuities?

There are different types of annuities in India that you can choose from. Some of these include the following:

1. Immediate annuity

2. Deferred annuity

3. Fixed annuity

4. Variable annuity

5. Lump sum annuity

✅ Is there an age limit for annuities?

In case of ICICI Pru Guaranteed Pension Plan - Immediate Annuity, the minimum age of somebody buying an individual annuity is 30 years. The maximum age for buying an annuity is 100 years.

 ✅ What is the best age to buy an annuity? 

There is no best age to buy an annuity. Most annuity plans allow you to buy a policy starting from the age of 30 years up to 60 years. You can buy a plan anytime during this period based on your individual circumstances, financial goals and retirement plans. However, annuities are primarily retirement-saving tools, so it is generally beneficial to align the purchase of an annuity with your desired retirement timeframe.

✅ Are annuities good for senior citizens?

Yes, immediate annuities give financial independence to senior citizens. Annuities allow senior citizens to live life on your own terms with a regular stream of income throughout their life with options to match different needs. Senior citizens can pay once, and get guaranteed regular income for life.

✅ What's the difference between immediate and deferred annuities?

An immediate annuity offers you an income right after purchasing the annuity plan. You make a lump sum payment to the insurance company, and the insurer gives you regular income payments, either for a specific period or for the rest of your life, shortly after purchasing the plan.

On the other hand, a deferred annuity allows you to purchase an annuity plan and start receiving the payments at a later date in the future. Deferred annuity plans accumulate funds over a period. This is known as the accumulation phase of the plan. At the chosen date, you start receiving income payments from your accumulated capital.

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✅ What happens to my annuity if I die?

insurance company. In the case of a joint life annuity, no money is paid after both the policy holder’s demise and the money stays with the insurance company.

✅ What are the tax* implications of buying an annuity pension plan?

You can claim tax* benefits on the premiums paid towards the plan up to ₹ 1.5 lakh per annum under Section 80C of The Income Tax Act, 1961. The income received from the plan is taxable as per the prevailing tax laws.

✅ When can you withdraw money from an annuity?

Money can be withdrawn from an annuity under certain special conditions. Firstly, some annuity plans allow withdrawal if the policyholder is diagnosed with a specified critical illness. Secondly, some annuity options return whole or part of the original purchase to the nominee after the demise of the policyholder.

✅ How much income does an annuity payout on average?

The income from an annuity payout can depend on a number of factors, such as the amount of money invested, the policy term, the type of annuity, the chosen payout option and your age, among other things.

✅ What are the most popular types of annuities?

There are different types of annuities in India that you can choose from. Some of these include the following:

1. Immediate annuity

2. Deferred annuity

3. Fixed annuity

4. Variable annuity

5. Lump sum annuity

✅ Is there an age limit for annuities?

In case of ICICI Pru Guaranteed Pension Plan - Immediate Annuity, the minimum age of somebody buying an individual annuity is 30 years. The maximum age for buying an annuity is 100 years.

 ✅ What is the best age to buy an annuity? 

There is no best age to buy an annuity. Most annuity plans allow you to buy a policy starting from the age of 30 years up to 60 years. You can buy a plan anytime during this period based on your individual circumstances, financial goals and retirement plans. However, annuities are primarily retirement-saving tools, so it is generally beneficial to align the purchase of an annuity with your desired retirement timeframe.

✅ Are annuities good for senior citizens?

Yes, immediate annuities give financial independence to senior citizens. Annuities allow senior citizens to live life on your own terms with a regular stream of income throughout their life with options to match different needs. Senior citizens can pay once, and get guaranteed regular income for life.

✅ What's the difference between immediate and deferred annuities?

An immediate annuity offers you an income right after purchasing the annuity plan. You make a lump sum payment to the insurance company, and the insurer gives you regular income payments, either for a specific period or for the rest of your life, shortly after purchasing the plan.

On the other hand, a deferred annuity allows you to purchase an annuity plan and start receiving the payments at a later date in the future. Deferred annuity plans accumulate funds over a period. This is known as the accumulation phase of the plan. At the chosen date, you start receiving income payments from your accumulated capital.

COMP/DOC/Jun/2023/156/3278

✅ What happens to my annuity if I die?

insurance company. In the case of a joint life annuity, no money is paid after both the policy holder’s demise and the money stays with the insurance company.

✅ What are the tax* implications of buying an annuity pension plan?

You can claim tax* benefits on the premiums paid towards the plan up to ₹ 1.5 lakh per annum under Section 80C of The Income Tax Act, 1961. The income received from the plan is taxable as per the prevailing tax laws.

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*Tax benefits are subject to conditions under Section 80C, 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for more details.

1Annuity will be payable in arrears. The frequency of annuity payments can be monthly, half-yearly, quarterly or annually as chosen by the annuitant at the time of purchasing the annuity. The annuity amount chosen at policy inception is guaranteed for life

ICICI Pru Guaranteed Pension Plan Flexi UIN: 105N187V04

ICICI Pru Guaranteed Pension I13 & I14 UIN:

COMP/DOC/Sep/2023/219/4147

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