What is immediate annuity?

An immediate annuity plan is an annuity plan that provides you with regular income immediately after buying the plan. With an immediate annuity plan, you pay a lump sum and start receiving regular payouts as early as the following month, depending on the frequency that you choose. Immediate annuity plans are a suitable option if you are nearing retirement and require an immediate and reliable source of income. This type of annuity offers you immediate benefits on your investment and ensures financial stability during your retirement years.

How does an immediate annuity plan work?

Here’s an example that can help you understand how an immediate annuity plan works:

Consider a scenario where Mr Sharma, a 59-year-old professor, is approaching retirement. Mr Sharma plans to retire next year and has a large savings amount. He wants to enjoy a comfortable lifestyle post retirement with a steady income to cover his essential and non-essential expenses.

Mr Sharma invests a lump sum from his savings in an immediate annuity plan. Basis his plan, Mr Sharma will start receiving a regular payout as early as the following month from the date of investing in the plan. The amount and the frequency of the payout are decided at the time of investment as per Mr Sharma’s preference and needs.

This income will continue for Mr Sharma’s life and will provide him with a dependable and regular source of money to support his post-retirement lifestyle.

Benefits of Immediate Annuity

Below are some key benefits of an immediate annuity plan:

a) Regular income during retirement:

The plan provides you with regular income to meet your post-retirement needs. This ensures you stay financially independent even during retirement

b) Safe investment:

Immediate annuity plans offer a fixed payout that is free from market volatility. These plans are safe investments with low risk.

c) Flexibility in payouts:

You can choose to receive your annuity payouts monthly, quarterly, half-yearly, or annually, as per your requirements.

d) Plan flexibility:

Some annuity plans offer multiple flexible options, such as option to add your spouse to the plan, option to get your purchase price back, and more. These options help you customise your plan as per your requirements.

e) Tax benefits:

You can claim tax* benefits on the premiums paid under Section 80C of The Income Tax Act, 1961 and maximise your savings.

When should you buy an immediate annuity plan?

The right age to buy an annuity plan can depend on a number of factors. You can consider buying an immediate annuity plan if you are nearing your retirement. Immediate annuity plans are suitable if you need an immediate source of income to meet your financial needs.

On the other hand, if you want to receive your annuity payouts after a specified period, you can choose a deferred annuity plan. Deferred annuity plans offer you with regular income from a later date, as chosen by you at the time of purchasing the plan.


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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.


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