Annuity plans provide financial assistance to a person when he reaches the stage of life (in which he cannot work to cover his basic living expenses).
After retirement, everyone wants a regular income source that is why many employers set up professional pension plans to provide a regular income source for their employees. This is extremely important for those whose employers do not provide vocational pension plans.
To live a hassle-free life after retirement, we should plan from today itself. In today’s post, we will see what are the types of annuity and annuity pension plans?
Annuity plans and life insurance plans are completely different concepts. Life insurance provides protection against specified events (for example, the nominee receives death benefits in case of death of the insured).
Whereas in annuity plans, regular income is received yearly, monthly, quarterly, half-yearly, or yearly basis.
However, buying an annuity plan is a must for an individual (if his/her job does not provide pension service on retirement) but not without knowing “which annuity plan to buy?”
If someone does this then he or his loved ones may get into trouble. For example, if someone has a spouse and has purchased such a pension plan (in which the annuity ceases on the death of the annuitant) then his/her spouse may face financial problems on his/her death as he/she will not get the annuity benefits. will be closed. Hence the type of annuity pension plan should be chosen carefully.
What is an Annuity Pension Plan?
In an annuity plan, we invest for a long period of time either in one go or monthly. This investment is further invested by the insurance company at different places and at the end of the term of the plan, the profit earned is returned to the annuitant according to the annual/monthly/quarterly/half-yearly period.
By which the annuitant is able to meet his financial needs after retirement. In simple language, we can take a pension plan to get a fixed income after retirement.
Who should take an annuity plan?
Anyone can invest in an annuity plan but it is more beneficial for those who are not provided with a pension facility by the employer after retirement. A person can do his retirement planning with the help of a good pension plan.
By doing this, when that person retires, he will be given money by the insurance company every month or on his fixed period.
We all come at an age when we are not able to work and we may need the help of others to meet our financial needs. But if we have a pension plan then the rest of our life can go well.
If a person does a job on which pension facility is available to him after retirement, then that person can retire with confidence and can live the rest of his life easily and happily.
But on the other hand, if there is no pension facility in someone’s job, then such a person may face difficulties due to lack of money after retirement. In such a situation, by investing in an annuity plan before retirement, regular income can be arranged for yourself.
Every person gives good education and good values to his children and expects that in his old age his children will take care of him as he is taking care of them. But still, it is seen that some children do not take good care of their parents and even send them to old age homes.
Therefore, we should make such arrangements for our old age that we are not financially dependent on anyone. This can be done by doing good retirement planning or those who lack financial planning can do so with a good pension plan type. Talk to your financial planner for more details.
When can one invest in Annuity Pension Plan?
You can invest in an annuity when you reach an age where you need retirement planning. So that after retirement you will start getting regular income.
If someone has not done retirement planning then he can invest in an annuity even after his retirement. Types of pension plans allow this to happen.
Benefits of Pension Scheme
An annuity is considered better than a fixed deposit or recurring deposit scheme as it offers higher returns.
Investing in it also provides tax benefits.
After retirement, regular income starts coming so that there will be no difficulties due to lack of money in old age.
Investing in such schemes for a long period of time gives very good returns which are generally not available in schemes like other fixed deposits. One needs to invest in a good type of pension plan to get good returns.
Types of Annuity Pension Plans
Here’s an overview of the different pension plan types and how you can choose one for yourself.
Deferred Annuity Pension Scheme
In this type of annuity pension plan, investments are started before retirement (the investment period is decided by the annuitant) so that till the retirement of the person, his plan accumulates enough money that the insurance company will give him regular monthly pension after retirement. starts providing.
The tenure of regular income can be for a limited time or it can be for a lifetime. In such plans, the wife starts getting the annuity after the death of the husband.
In a Deferred Annuity plan, the annuitant (can be monthly, quarterly, half-yearly) after the end of the specified period (after 10 years, 15 years, or 20 years), the tenure is decided at the time of taking the plan. is) receives regular income.
To get regular income, the annuitant first invests the money for a fixed period and the insurance company further invests his investment at different places.
The investment period is called the accumulation period and the annuity period is called the payout or liquidation period.
A deferred annuity plan is suitable for those who have some time in retirement for example let’s say John’s present age is 25 years and his retirement age is 45 years.
In this scenario, John can opt for a deferred annuity plan Because he is working and there is still a lot of time in his retirement.
Immediate Annuity Plan
This type of pension plan as the name suggests is designed to meet immediate needs. To avail of the benefits of the Immediate Annuity plan, the annuitant has to make a one-time investment and after 6 months or 1 year of investing, the pension plan benefits start coming from the insurance company.
This pension scheme is suitable for those people whose retirement time is very near or they have retired.
Annuity plans based on pension
Life Annuity
In this type of pension plan, the annuitant receives a pension for life. Some life annuity plans offer periodic payments to the nominee on the death of the annuitant; But in a pure life annuity, the benefits cease to accrue on the death of the annuitant.
Annuity Certain
This pension plan offers periodic payments for a certain period of time. Annuity Certain does not stop at the death of the annuitant. If the annuitant dies, the beneficiary starts receiving periodic payments.
Joint Life Annuity
In a joint-life annuity, the annuitant receives periodic payments for life and on his/her death 50% (approximately) of the annuity is paid to the spouse. It is to be noted that if the nominee dies before the annuitant then the pension plan will terminate on the death of the annuitant.
Guaranteed Annuity
In a guaranteed annuity plan, the annuitant invests his money for a period of time and receives fixed periodic payouts. In this type of pension plan, the insurance company takes care of all the risks associated with the investment itself.
Whether there is profit or loss in the investment, it does not affect the annuitant, he definitely gets the fixed benefits.
Variable Annuity
Variable annuity plans provide fluctuating periodic payouts. In the case of this type of pension plan, the payouts are not fixed, sometimes the annuitant may get higher payouts and sometimes lower payouts. In short, the annuitant himself bears all the risks related to his deposit.
This annuity plan is a bit riskier than other plans but it also has opportunities to get more benefits.
