6 Benefits of Buying an Annuity Plan After Retirement

Written by : Knowledge Centre Team

2025-09-03

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Retirement is a mix of different investment stages and options. An annuity is one of the final stages of a retirement plan. An annuity is a term used to refer to an investment option that allows you to draw a regular income. Though you don’t need to retire to start the income, it is advisable that you should start after retirement only.

The best annuity plans will help you mitigate the risk of outliving your savings. The primary aim of the annuity plan is to turn your retirement corpus into safe and long-term income.

Key Takeaways

Annuity plans ensure a steady and predictable income stream throughout retirement.
Unlike mutual funds or stocks, annuities are not impacted by market fluctuations, making them a reliable and stable income source in your post-retirement years.
Premiums paid towards annuity plans qualify for tax deductions under Section 80C.
Certain annuity plans offer liquidity options via special surrender values and even allow policy loans after meeting specific conditions.
You have the option to choose from monthly, quarterly, half-yearly, or annual payout modes to align your annuity income with your lifestyle and financial needs.

What is an Annuity Plan?

An annuity is an investment that will enable you to ensure that you have a regular and guaranteed portion of income, and this is after you have retired. By purchasing an annuity, you either invest a lump sum of money or make payments in instalments to an insurance firm. The company will, in turn, guarantee you a fixed income for a specified duration or until death.

Depending on your short-term and long-term retirement objectives and the nature of your available financial resources, this source of income may start at the moment you invest (immediate annuity) or after several years (deferred annuity).

Compared to other investment arenas, such as stock investment or mutual funds, where the market's performance directly affects the investment and involves risks of uncertain returns, an annuity is a sure and stable investment. This is what makes it a favourite investment instrument among people who wish to save for their retirement without having to worry about market tides and waves.

For example, if you have reached close to your retirement age and have saved and invested well, generating a significant corpus, you have the option of purchasing an annuity plan. This will make sure that you will have a fixed income at the end of each month or quarter, just as your salary and will be able to sustain your lifestyle or to take care of expenses very easily.

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What are the Benefits of Buying an Annuity Plan?

Annuities generate a guaranteed income stream, often over the lifetime of the holder and their spouse. There are no other financial products that do this. Debentures can pay back interest until maturity. Stocks can grow wealth in the long run. But neither of these instruments can give a guaranteed income over a lifetime.

Life insurance annuity plans like Pension4Life from Canara HSBC Life Insurance are best for creating a stream of reliable post-retirement income.

Annuities provide the following key benefits:

Safe & Reliable Income: To manage post-retirement expenses, you may save some amount each month from your current income. But saving alone may not help you reach a corpus that you have to sustain your standard of living even after retirement.
The savings should also work hard so that they grow multi-fold by the time you retire. Annuities are among the safest available financial instruments that create wealth as stocks do, but with much lower volatility and risk. You can choose the frequency of payouts and opt for monthly, quarterly, half-yearly, or yearly streams.
Annuities are technically the same as insurance policies and are not made for short-term investments or gains. Annuities offer guaranteed income streams for the rest of your life and your spouse’s life. You can additionally use annuity plans to return the purchased corpus to your nominee after your spouse’s demise.
Moreover, there is an assurance for the family to opt for a return of the purchase price in case of your demise.
Wealth Boosters: Insurance investments are designed to gain from the dynamics of movements in the financial markets to give you superior returns in the targeted period. You can also avail of higher annuity instalments for the increased purchase value. If you purchase an annuity online, your annuity rate will increase by 2%. For NPS subscribers who have purchased through the sales team or online channel, Canara HSBC Life Insurance offers an increase in annuity rates by 1%.
Loyalty Additions: Canara HSBC Life Insurance offers an increase for annuities purchased by existing policyholders of the company.
Automated Portfolio Strategies: If you use plans that build your retirement corpus and receive pension income from it, you can benefit from the multiple investment options. You can invest your money in both debt and equity instruments based on automated or pre-determined allocation strategies.
When you are young, the plan helps you invest aggressively in equity-oriented funds and receive better growth for your retirement funds. You can switch the funds to the safe debt and liquid funds from equity and continue the plan up to the age of 80.
The partial withdrawals after retirement will be tax-free.
Tax-Savings U/S 80C & 10(10D): The amount paid towards the premium is deductible under Section 80C up to ₹1.5 lakhs. The tax saving works on annuity plans provided by life insurers under the following conditions:
1. The annual investment in the plan is less than 10% of the life cover
2. Maximum annual investment in ULIP plans should not exceed ₹2.5 lakhs (for ULIPs bought after 1st Feb 2021)
High Liquidity: Your money is not “stuck” as you may assume. Annuities offer more liquidity than most people think. The policy allows withdrawal under the “Special Surrender Value” status. Meaning, as long as specified conditions are met, you can withdraw your money.

Stages of Retirement Plan for Annuity

The pre-retirement saving phase is called the “accumulation phase”, whereas the post-retirement payout phase is termed the “vesting phase”. Annuities are the investment option you can use in the vesting phase. You can still invest in two types of annuities:

Immediate annuity
Deferred annuity

In case you are already at retirement age and have a lump sum amount, you can buy an “immediate annuity”. Thus, the payout begins immediately in the form of cash flows paid at specified intervals (monthly/quarterly/annually).

However, if you want to start the income a few years later, the deferred annuity is a better option.

Joint Life Annuity

In both types of annuities, the annuity can continue for either a fixed period or for your lifetime. However, when your spouse is dependent on your pension, you do not want it to stop after your demise. Thus, you can opt for a joint life annuity.

A joint life annuity implies that your spouse will continue receiving income streams even after your demise. Through the process of annuitisation, your contributions are converted into periodic payouts that can last your lifetime as well as that of your spouse. The annuitised payments continue even if the total payouts are more than the saved corpus with interest factored in.

In case of Immediate Life Annuity with Return of Purchase Price on Critical Illness (CI) or Accidental Total & Permanent Disability (ATPD) or demise before age 85, whichever occurs earlier, annuity payouts will cease, and 100% of the purchase price will be payable.

Joint Life Annuity

Final Thoughts

Retirement planning is not really an issue of saving funds, but instead making sure that the amounts saved can last you all your life without worrying about money issues. It is in this process that annuity plans come in quite handy as they provide you with the assurance of consistent income on a regular basis, which lasts the rest of your life and even after death in some annuity policies, to a spouse. Their presence gives the necessary financial security and assurance at retirement.

There is such a thing as having trusted solutions, such as Pension4Life by Canara HSBC Life Insurance, so that you will rest assured that you will live a secure retired life. Such annuity plans are also aimed at securing your future, offering the benefit of tax savings, and comfortable maintenance of your lifestyle. The right annuity plan today invested can help you through until your retirement years, so you will be able to have some dignity, independence and confidence to go through your retirement life.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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