Your retirement allows you to bid farewell to all the stress and time constraints. Once there, you will be able to devote time to your hobbies, family, and post-retirement dreams. However, without savings or a steady flow of income, it might not be possible. Also, the rising medical costs and inflation can disrupt your peace of mind. Hence, you need to arrange for adequate funds for your retirement years with a sound retirement plan for your golden years.

Retirement plans cater to different needs. One of those is a selection between a lump sum benefit and an income benefit (regular payouts). Here's a comparison of both to help you make an informed choice.

Pension Annuity

An annuity plan provides a steady stream of income for life after you make a lump sum investment.

You have the flexibility to choose from a wide range of payout options to suit your specific retirement needs. Also, you can avail tax# benefits under Section 80CCC of the Income Tax Act, 1961.

What benefits do you get?

  • A steady flow of income throughout your life, for your everyday and medical expenses. The income does not depend on financial market conditions
  • You need not worry about outliving your financial resources
  • If your spouse/family member depends on you financially, you can choose to provide a lifetime income for him or her
  • You need not make tough investment decisions or manage your portfolio
  • You can arrange for a return of your premiums paid to your nominee after an unfortunate event

The viability of annuity plans depend on the life insurance provider's credibility. A financially weak company will be unable to meet its obligation towards policyholders. You should select a life insurer with a claim settlement ratio of over 97% and a solvency ratio of over 1.5. It will ensure the continuation of your annuities for life.

Lump Sum Payments

A lump sum pension is a one-time payment from your retirement plan. It provides a large sum of money, which you can use to fulfil your immediate retirement needs like; starting a new business or going on a world tour with your loved ones.

What benefits do you get?

  • A large sum of money to fulfil your post-retirement dreams
  • Helps you to ease the financial burden of responsibilities like your child’s education or marriage, even if you have retired
  • If you have large debts, the lump sum amount can help you repay your dues
  • Your financial dependents can receive the remaining money, after an unfortunate event


  • If you fail to maintain a disciplined budget, you may spend your money too fast and run out of funds too soon
  • Your investment needs careful asset management. If you put your money in conservative investments, you may not be able to keep pace with inflation


Pension payments last throughout your life and can also continue for your surviving spouse. And lump sum payouts give the flexibility to invest where you choose and spend as per your needs.

Before making a selection, you can consider factors like:

  • Your health condition
  • Your investment skills and tolerance for market risks
  • Your monthly expenses
  • Existing savings and other income sources like house-rent, a pension from employers
  • Outstanding debts

If you have other savings, you may not need a lump sum. However, if you want your investments to increase, you can use a lump sum to fund them further. On the other hand, an annuity plan will help you with your everyday expenses, keeping you financially independent. Hence, the final decision depends on your personal preferences, current financial circumstances, and retirement goals.

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# Tax benefits under the policy are subject to conditions under Sections 80CCC, 10(10A), 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 details, before acting on the above.
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