Pension Plans

help plan for retirement and offer the security of insurance.

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Why it is Must to Have an Annuity Plan?

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Successful retirement planning is about accumulating a retirement corpus that is large enough to take care of your retirement needs and desires. There are various ways to build a retirement corpus. You can park your money into fixed deposits, public provident funds, Pension plans or National Pension Scheme. These investment avenues will help you grow your savings regularly, so that when you reach retirement enough savings are accumulated. In order to generate regular monthly income from the retirement corpus it is reinvested so that regular income can be earned.

When you choose a pension plan for your retirement planning, the retirement corpus that is created at the time of retirement is automatically converted into annuity. I am not sure if you are aware about the concept of annuity. An Annuity is regular stream of income that the Insurer will provide to the retiree until the death of the retiree or for a predetermined period as chosen by the retiree. There are various options for the retiree to choose from when it comes to annuity. The options help the retiree to manage his regular income in the most efficient manner and in accordance to his specific needs. Here are some of the annuity options to choose from:

Life Annuity

This is the plain vanilla option under which annuity is payable by insurance company until the demise of the annuitant.

Life Annuity With Return of Corpus

In this option the retiree will receive a fixed regular income till he dies. After his demise the purchase price of the annuity is returned to the nominee. Under this option the regular income that can be received is limited. There are variations that are available under which the nominee can opt to receive the purchase price in installments.

Life Annuity Increasing at a Predetermined Rate

The retiree receives a regular income which increases every year. The purpose is to help the retiree maintain his standard of living despite inflation. A 3 to 5 percent increase in annuity every year can be expected. In most cases the annual increase in annuity is not linked to the rate of Inflation but is fixed.

Joint Life and Last Survivor Annuity

Under this option if the Annuitant dies before his or her spouse the annuity continues. The annuity will be payable for the life Term of the spouse. The residual annuity that is payable to the spouse can be the same or a fixed percentage of the original annuity. The buyer need to decide upfront if he would like the annuity payable to the spouse after his demise to be same or 50 percent of what the couple received.

Guaranteed Annuity For a Predetermined Period

If the retiree expects the regular income needs to be higher for a predetermined period post retirement, this option is suitable for them. A guaranteed annuity is paid for a predetermined period of 5, 10 or 15 years and thereafter the annuity that is payable is less than what you received in the guaranteed period