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  • Annuity / Pension Plans in India – Detailed Overview

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    Retirement is an inevitable stage that comes in every working individual’s life. It is a stage in life which is likely to bring feelings of apprehension, especially in terms of finances. Now that regular paychecks will no longer be there, maintaining one’s lifestyle and meeting expenses is a valid worry which will every retired individual’s mind. However, insurance brings a special product designed specially to provide a regular income after you’ve retired, and in some cases, also provide insurance cover. Here are some important things which can help you decide on which pension plan is best suited for you.

    What is an Annuity/Pension Plan?

    Annuity is an insurance product that pays income and can be used as a part of retirement planning. You need to make an investment in the annuity and it makes payments to you on a future date. The payments are determined on length of your payment period.

    Why Do I Need A Pension Plan ?

    Retirement is a stage which comes in every working individual’s life, which can give rise to apprehensions in terms of income and maintaining one’s lifestyle. Post retirement, an individual’s source of income may no longer be there, forcing them to change their lifestyle. At such a time, a Pension Plan ensures that you continue receiving regular income after your retirement, once the regular work paychecks cease. After working for a major part of your life, a retirement is a well-deserved time, during which you should enjoy life. A pension plan will help fund the activities remaining on your bucket list, while also allowing you to be financially independent.

    Benefits of Pension/Annuity Plans :

    There’s a large part of our population which is fast approaching retirement, making them ideal candidates for pension plans. There is no shortage of insurers offering pension/annuity plans in India, making it easy for one to choose from a bevy of options. However, before you choose a certain plan, it is important that you understand exactly what that plan has to offer, its advantages, disadvantages and all related details. There are plenty of pension plans available in the market, each with its own set of benefits and advantages. Some of the benefits common to all pension plans are listed below.

    Provision of Regular Income Post Retirement – One of the biggest benefits of an pension plan is that it provides incomes after retirement. Pension schemes available in India help you cover your living expenses post retirement by providing a guaranteed income. With the variety of pension plans available out there, you can choose from one which suits your needs best. While some plans provide you with lifelong income, there are others which offer better returns.

    Funds at Times of Need – Some pension plans provide lump sum payments which can help you meet major expenses through life. Before your retirement, you may have several major expenses to take care of life purchasing a house, financing your child’s education, etc. Before you choose a policy, make sure you go over the details of the policy so you know exactly what you will be getting from it.

    Tax Benefits – Investing in an insurance policy comes with a set of tax benefits which you can avail. The same applies to retirement insurance plans. Check all the policies which you may have short-listed for the tax benefits they offer. Investing in a pension plan from an early age can help you save considerably on tax payments. Check your policy details to find out and understand the ways in which you may benefit from the available provisions of tax exemption under Section 80C of the Income Tax Act.

    Insurance Protection – In addition to providing income post retirement, pension plans also provide insurance cover. This is especially useful to provide protection in the unfortunate event of a death following which the family’s income will be protected. Insurance cover forms a part of most retirement plans which are offered by life insurance providers. this is helpful so that the surviving spouse does not have to undergo the financial burden following an unfortunate event.

    Annuity/Pension Plan Options :

    There are 5 segments but the range of options varies from person to person. The 5 segments are as follows:

    • Annuity Payable For Life

      Fixed annuity is paid at regular intervals throughout the insured’s life. The pension is stopped on the annuitant’s death. If you don’t have any obligations post your death, then opt for this option. Highest amount of pension is payable to an individual compared to the other options.

    • Annuity Payable For Life With A Guaranteed Period

      The annuity is paid for a certain period and thereafter till the annuitant is alive. If the guarantee period is shorter, you will get higher pension. The annuity stops on the death of the annuitant. If you have children who can take care of you after a few years, take this option for a shorter period.

    • Life Annuity With Purchase Price Return

      If you want to leave any amount for your dependents, then opt for this option. The annuitant will get pension till he dies, after his death, the purchase price will be given to the nominee.

    • Increasing Annuity at a fixed rate

      The annuity paid increases each year with this option.

    • Joint life and last survivor annuity

      Annuitant will receive pension till he dies, if his spouse survives then she is also entitled to the pension. The considerable amount of pension to be paid to the spouse can be selected.

    Types of Annuity/Pension Plans :

    The following are the types of Annuity/ Pension Plans: available.

    • Deferred Annuity

      Here the annuitant pays premiums till the policy term is over. After its term, the annuitant will start receiving the pension. No tax is levied on the amount the annuitant invests. You can make a one-time payment or make regular contributions towards the plan.

    • Immediate Annuity

      The annuitant has to deposit a large amount and the pension will begin immediately. The annuitant can avail tax benefits prevailing in India.

    • With & Without Cover Pension Plan

      ‘With cover’ will give you a life cover, a lump sum amount is paid to your family in the event of your death. ‘Without cover’ implies you do not get any life cover. The amount built till the date of your death is paid to your dependents. Deferred annuity is with cover and immediate annuity plans are without cover.

    • Annuity Certain

      Annuity is paid for a specific period. If he dies before that period, the beneficiary receives the amount.

    • Guaranteed Period Annuity

      Annuity is paid for certain periods regardless of the survival of the annuitant.

    • Life Annuity

      Pension is paid till the annuitant’s death. If with spouse options is chosen, then the pension will be paid to the spouse.

    • National Pension Scheme

      This is introduced by the government. You have the option of withdrawing 60% of the amount at retirement and the rest is used to purchase annuity. The maturity amount is not tax free though.

    How to Choose The Right Pension Plan?

    With the variety of pension plans available in the market, it could be a challenge to choose the one which suits your requirement best. However, before you invest in a pension plan, there are some basic parameters you must evaluate.

    • Returns – The most important part of any investment is the return it provides. Chose a pension only after you have a fair idea about the returns it would provide. Always keep in mind that if returns are guaranteed, the rate of returns will be low. Choose an option which provides high returns.
    • Liquidity – While most pension plans will have a lock-in period, during which you cannot withdraw the invested funds, there may be some plans available which offer a certain degree of flexibility in terms of withdrawal.
    • Tax Benefits – Insurance payments can help you save on tax payments to a certain extent. The same goes for pension plans. Before you invest in one, ensure that you find out the tax implication that the plan will come with.
    • Tax Exemption of Dividend / Interest – Another factor to consider when looking or pension plans is the tax exemption of the interest or dividend which you’re going to receive. Most pension mutual fund dividends are not exempt from tax.
    • Minimum & Maximum Investment Amount – Different pension plans carry different limits in terms of the minimum and maximum investment which can be made towards the plan. Check this before you invest so you can plan your budget accordingly.
    • Investment Mix – This factor comes into play only with regard to pension plans which are offered as part of a mutual fund. Find out the investment mix offered by the pension plan. While, usually the schemes are balanced, they may change over time.  
    • Additional Benefits – Retirement plans offer are often accompanied by a string of additional benefits like life cover, tax advantage, etc. Find out the additional benefits which different plans offer, before you make your selection.

    Eligibility Criteria for Pension Plans:

    In order to be eligible for a pension plan, individuals must fall within a certain age group, usually between 35-75 years. This age bracket (min-max age) may differ with different insurance providers.

    Pension Plan Riders:

    Most pension plans come with add-on riders which can be taken to enhance the benefits provided by the plan. some of the commonly available riders include:

    • Accidental death and dismemberment rider
    • Term rider
    • Critical illness rider
    • Waiver of premium rider

    Popular Pension Plans Available in India:

    SBI Life – Annuity Plus

    With this plan you can choose your annuity options. You can enjoy the following:

    • Regular income from the age of 40.
    • Lifetime annuity pay-out is paid for you and your family.
    • You can choose the frequency of the pay-outs.
    • You can add a rider, SBI Life- Accidental Death Benefit Rider.
    • You get the following options: Single Life annuity, Lifetime income with Balance Capital Refund, Lifetime income with Annual increase of 3-5%, lifetime income for 5, 10, 15 or 20 years, Two Lives’ Life Annuity.
    • You can avail tax benefits as per the tax laws prevailing in India.

    HDFC Life New Immediate Annuity Plan

    • Get guaranteed income for as long and you and your spouse lives.
    • Choose from the wide variety of annuity options.
    • Choose the frequency of annuity.
    • Death benefit on certain annuity options are payable.
    • Tax benefits can be availed and they are subject to the tax laws in India.

    ICICI Pru Immediate Annuity

    You need to make a one-time payment or choose from the 5 pay-out option. You get 4 modes of pay-out i.e. monthly, quarterly, half-yearly or yearly. The pay-out options are as follows:

    • Annuity for life.
    • Annuity for life with return of purchase price.
    • Joint life, last survivor without purchase price return.
    • Joint life, last survivor with purchase price return.
    • Guaranteed annuity for 5, 10 or 15 years.

    Reliance Immediate Annuity Plan

    This is a single premium plan. You can avail the following benefits from this plan:

    • Earnings can be converted to regular income.
    • You can get regular income for your entire life.
    • You can leave some funds for your dependents.
    • Receive tax benefits as per tax laws prevailing in India.

    BSLI Immediate Annuity Plan

    You can avail the following benefits with this plan:

    • You can get regular income in your retirement.
    • You can choose the frequency of the pay-out.
    • You need not have to undergo a medical test to avail this policy.
    • You can enjoy tax benefits under Section 80CCC of the Income Tax Act, 1961.

    Pension Plan FAQs

    1. Can I make an early withdrawal from my pension plan?

      A. Early withdrawal from retirement plans may be allowed. However, there are certain government regulations applicable on early withdrawal from retirement policies. Do check with your insurer regarding early withdrawals before you invest in a certain plan.

    2. What is Death Benefit under a Pension Plan?

      A. In a pension plan, Death benefit is defined as the amount which will be paid on the passing away of the insured to the beneficiary of the insured, named in the policy.

    3. Are there any tax benefits accompanying Pension Plans in India?

      A. Yes, Pension Plans do provide tax benefits to the policy holder. Under section 80CCC of the Income Tax Act, premiums which you pay towards your Pension Plan will be subject to deduction up to the maximum amount of Rs 10,000 on your taxable income.

    4. What is meant by Annuity in a Pension Plan?

      A. Annuity is the term used to define the systematic payouts which you receive from your pension plan after your retirement. Most pension plans will allow individuals to avail annuity payouts on a monthly, quarterly, half-yearly or yearly basis.

    5. Can I apply for a Pension Plan online?

      A. Yes, most insurance providers have comprehensive websites which not only allow for viewing of different pension plans but also allow them to apply for a plan of their choice online.

    6. Can I make the premium payment for my Pension Plans online?

      A. Yes, online payment of premium can be done very easily. Most insurers do have a secure payment system in place to enable policy holders to pay their premiums online in a timely manner, without having to visit the branch office.

    7. I want to change my premium payment frequency for my Pension Plan. Can it be done?

      A. If you wish to change your premium payment frequency, you are advised to contact your insurance provider for the same as the facility may or may not be allowed by different insurers.


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    News About Annuity/Pension Plan

    • Atal Pension Scheme to get tax benefits on par with National Pension System

      The Income Tax Department recently announced that investments made towards the Atal Pension Yojana (APY) will enjoy the same tax benefits offered by the National Pension System. Estimates show that over 20 lakh members have joined the APY since its inception in June 2015. With the government contributing 50% to the investment made by a member under this scheme, it has garnered great attention. With a minimum term of 20 years, added income tax benefits are bound to bring new members under its fold.

      23 February 2016

    • FDI of Insurance Companies with pension plan under scrutiny

      Foreign Direct Investments of Insurance companies with pension ventures is under a lot of scrutiny owing to lack of clarity on how foreign limit investment limit in the pension sector should be calculated. The Foreign Investment Promotion board had recommended a foreign investment proposal worth Rs.1,705 crore for the consideration of cabinet committee on Economic affairs.

      25 January 2016

    • CPPIB invests a whooping Rs.1,000 crore in Larsen & Toubro

      Canada Pension Plan Investment Board invested a whooping Rs.1,000 crore in Larsen & Toubro’s infrastructure arm. This is the second tranche investment made by the company in the engineering major Larsen & Toubro. The first tranche of investment was in December 16, 2014 where the company invested Rs.1,000 crore.CPPIB's subsidiary has made the second tranche of investment today by subscribing to compulsorily convertible preference shares of L&T IDPL

      16 December 2015

    • Retirement planning is important for all

      With a proper asset allocation plan, one can secure one’s retirement. Talking about the importance of retirement planning, Nilesh Shah, the Managing Director of Kotak Mutual Funds says that that the pattern of living life has changed and it is important that your plan for your retirement rather than simply relying on your parents. Because, the option of relying on your children no longer seems to work. According to him, you can plan your retirement by allocating your assets into various investment tools such as equity, real estate, debt and commodities. It helps people maintain a good financial health and ensure a secured financial future.

      8 December 2015

    GST of 18% is applicable on life insurance effective from the 1st of July, 2017

    Annuity/Pension Plans Reviews

  • Page 1 of 50 1 2 3 4 5
    • LIC Life Insurance
      "Good. Can do better"
      0.5 3.0/5 "Satisfactory"
      I also have a life insurance with LIC. The tenure is for twelve years. I have taken a money back policy and every three years I would get my bonus which is a feature in this policy. The premium is normal too. Though there are things which can be done online. I still need to visit the office.
      Was this review helpful? 0
      , chennai
      Reviewed on Sep 20, 2018
    • HDFC Life Life Insurance
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I have taken a life insurance from HDFC Life. I could purchase the insurance online. The tenure is for ten years and there are good plan benefits and sum assured. I would get my maturity amount after the 10th year. The premium is nominal and I can pay it online.
      Was this review helpful? 1
      , chennai
      Reviewed on Sep 20, 2018
    • LIC Life Insurance
      "Satisfactory"
      0.5 4.5/5 "Excellent!"
      I have taken another policy with LIC. It is a Jeevan Saral policy. The premium is normal. The sum assured and the policy benefits are good. I would get the benefits of this policy after the retirement. It has been a very good experience till date.
      Was this review helpful? 2
      , vadodara
      Reviewed on Sep 18, 2018
    • LIC Life Insurance
      "Good in benefits"
      0.5 4.5/5 "Excellent!"
      I have also taken a endowment policy from LIC. The policy benefits are good. The sum assured is also good. The benefits was also provided to me immediately. It has been a good experience and it is secure to get the policies from this company. Good overall.
      Was this review helpful? 0
      , vadodara
      Reviewed on Sep 18, 2018
    • LIC Life Insurance
      "Beneficial policy"
      0.5 4.5/5 "Excellent!"
      My father has taken a life insurance from LIC for me. It is a money back policy and the benefits are good and the sum assured is good. I got the benefits by default without having to go behind LIC.
      Was this review helpful? 0
      , vadodara
      Reviewed on Sep 18, 2018
    • SBI Life Life Insurance
      "LIFE INSURANCE SHOULD BE TAKEN BY EVERYONE FROM SBI LIFE IN "
      0.5 4.0/5 "Great!"
      I have taken life insurance from Sbi Life insurance of money back gold policy . This policy covered with accidental coverage . This is a good policy with good returns . I have chosen for 12 years period with better policy coverage. I recommended every one to have one policy of SBI LIFE.
      Was this review helpful? 0
      , champawat
      Reviewed on Sep 18, 2018
    • Bajaj Allianz Life Life Insurance
      "Not paying back maturity amount"
      0.5 0.5/5 "Unacceptable"
      My policy (0002439625) has matured on July 2018, now three months over Bajaj Allianz has not paid my maturity amount back. Each time I contact them getting silly reason to avoid to pay back my maturity amount. The first reason was they despatch a cheque aready. After one moth they changed ask me my bank account details, I have submitted 5 times but the same is not updated their system. Now they are telling the clarity of the document is not clear. Any of the above cases Bajaj Allianz has not contacted me to inform this. Each time I have called them and ask about my maturity amount.
      Was this review helpful? 0
      , bangalore
      Reviewed on Sep 17, 2018
    • ICICI Prudential Life Insurance
      "Worst Policy Provider. Dont Trust them"
      0.5 0.5/5 "Unacceptable"
      one of the unethical and non trusted brand. don't go with icici policy there are lots of hidden clause which these guys hide from you. please avoid going for icici pru policy. I have avail policy in month of January they have hide lots of bad things about policy.
      Was this review helpful? 3
      , pune
      Reviewed on Sep 17, 2018
    • Future Generali Life Life Insurance
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I've a life insurance policy with the Future Genrali. I am paying a premium of 12000 per year. Their hasn't been any issues with the policy. The policy is a normal life insurance with out any commendable benefits. They need to improve their customer support services.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Sep 15, 2018
    • Kotak Life Life Insurance
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I've a life insurance policy with the Kotak, I am paying a premium of 11000 , they need to work on their promises while purchasing the policy. I am just paying the premium with out any benefits or a proper support. When it comes to serving customers they're all hesitant.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Sep 15, 2018
    • Max Life Insurance
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I've a life insurance policy with the Max Life. I am paying a premium of 35K per year, they all provide massive offerings in order to convince the customers but once the customer has taken the policy; the service part becomes pathetic. They need to be more helpful and beneficial form the customer point of view.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Sep 15, 2018
    • Birla Sun Life Insurance
      "Good Policy"
      0.5 4.0/5 "Great!"
      I have a life insurance policy with Birla Sun Life from last 10-12 years and it is a long term policy. I pay a premium of Rs 6000 once in 6 months and i am convenient with the payment options. The tenure period for this insurance policy is 20 years.
      Was this review helpful? 1
      , mumbai
      Reviewed on Sep 14, 2018
    • LIC Life Insurance
      "Best policy"
      0.5 5.0/5 "Blown Away!"
      My life is insured with LIC from last 12 years and it is s long term policy. The name of the policy is Jeevan anand and the tenure period for this policy. I pay my premium once in 3 months through net banking and the maturity period for this policy is 16 years.
      Was this review helpful? 2
      , pune
      Reviewed on Sep 12, 2018
    • Aviva Life Insurance
      "Best policy"
      0.5 5.0/5 "Blown Away!"
      I have a life insurance policy with AVIVA life from last 6 years, i am happy with the coverage value of this policy. It covers critical illness as well as it has a cashless treatment. A premium of Rs 4500 has to be paid for this policy and i pay it through net banking.
      Was this review helpful? 1
      , pune
      Reviewed on Sep 12, 2018
    • LIC Life Insurance
      "Good Policy"
      0.5 3.5/5 "Pretty good"
      I hold a Money back policy with LIC from last 6-8 years, i get a money back after every 4 years. I pay my premium once in a year by cheque and i am convenient with the payment options. I am happy with the returns and benefits of this policy. The tenure period for this loan is 25 years.
      Was this review helpful? 1
      , chennai
      Reviewed on Sep 12, 2018
    • LIC Life Insurance
      "Good Policy"
      0.5 4.0/5 "Great!"
      I have a life insurance policy with LIC from last 1 year and it is a long term policy. I am happy with the returns and benefits of this policy. I pay my premium once in 3 months through net banking and i am convenient with the payment options. The maturity period for this policy is 15 years
      Was this review helpful? 1
      , chennai
      Reviewed on Sep 12, 2018
    • LIC Life Insurance
      "Good Policy"
      0.5 3.5/5 "Pretty good"
      I have a life insurance policy with LIC from last 4 years and it is a long term policy. I am satisfied with the coverage and returns of this insurance policy. I pay my premium on yearly basis and the payment mode is Auto debit. The tenure period for this policy is 15 years.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Sep 12, 2018
    • LIC Life Insurance
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I've two life insurance policies with the LIC, I'm paying a premium of 40000 for the two policies. I am making the premium payments online. So far there hasn't been any issues with their services.
      Was this review helpful? 1
      , lucknow
      Reviewed on Sep 11, 2018
    • LIC Life Insurance
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I've two life insurance policies with the LIC, I'm paying a premium of 40000 for the two policies. I am making the premium payments online. So far there hasn't been any issues with their services.
      Was this review helpful? 0
      , lucknow
      Reviewed on Sep 11, 2018
    • SBI Life Life Insurance
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I've a life insurance policy with the SBI Life. I am applying a low premium, So far it has been a hassle free experience with the policy. I am just paying the premium. The premium is comparatively low.
      Was this review helpful? 1
      , udaipur
      Reviewed on Sep 11, 2018
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