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Single vs Joint-life Annuity: Which One is Better?

dateKnowledge Centre Team dateAugust 13, 2021 views234 Views
Single Annuity Plan | Joint Life Annuity | Best Retirement Plan

Time and tide wait for no (wo)man! Ageing is an inevitable process and someday you will have to hang up your boots either because your employer wants you to do so because of company norms or because your health will inhibit you from working.

Even after you stop working, bills will not stop coming in. You will have to pay for groceries, the telephone, Internet, electricity, water, and so on. Will your savings suffice and help you live comfortably for an undefined period? Statistics give average life spans. But some people would be above that average whereas some others would be below. What if you outlive your savings during your retirement?

The Annuity Assurance

Senior citizens should enjoy old age rather than endure it. This is where annuities step in. An annuity is a type of insurance that promises you, lifetime income, post-retirement. When you first start earning, your immediate priority becomes rearing a family and improving your lifestyle. But at the same time, if you set aside some portion of your income to build your retirement kitty, you will have a corpus that will allow you to lead an equally good lifestyle post-retirement.

Annuities are useful because your retirement corpus will be used by the insurance company to give you returns at pre-defined intervals.

Types of Annuities

There are different types of annuity options available and some of the prominent ones are listed below:

1. Life annuity

Annuities are paid in the opted frequency (monthly/quarterly/yearly) until your demise.

2. Life annuity with return of purchase price

You will get annuity pay outs in the opted frequency (monthly/quarterly/yearly) until your demise. After your demise, the corpus used to purchase the annuity is paid to your nominee.

3. Annuity payable for a guaranteed period

The annuity is paid for the guaranteed period, even after your demise. Annuity stops either on your demise or on completion of the guaranteed period, whichever is later.

4. Joint life annuity

Annuities are paid until either you or your spouse is alive.

5. Joint life annuity with return of purchase price

These annuities are paid until you or your spouse is alive. After the demise of both, the nominee will get the amount initially invested.

When is Single Life Annuity Better?

A single-life annuity pays only until your demise or until the end of the guaranteed period, whichever is earlier. It is suitable only if you do not have any financially dependent family members or if your spouse has their own annuity/pension plan in place.

Learn how will a savings plan help a non-working spouse.

Few of the conditions when it might be ok for you to consider a single-life annuity plan are:

a) Your spouse has a separate annuity plan

b) Your spouse is older than you

c) You already have an adequate joint-life annuity together

d) Your annuity plan has a life cover until your demise

One of the key points to consider is whether your spouse can survive without getting any portion of your income. If no, then factoring in some portion of income for the spouse is advisable.

The only factor that will influence your choice is, ‘how financially independent is your spouse after retirement?’ If not, the first course of action should be to ensure that your spouse will have financial support even after your demise.

A joint-life annuity is one way to ensure that support.

How does Joint Life Annuity Work?

In the case of a joint-life annuity, money is paid to you until your demise and to your spouse until his or her ultimate demise. This arrangement gives you peace of mind that your loved one is financially secure even when you are not around.

A joint-life annuity is useful if your spouse does not have their own annuity/pension plan or if the plan will not be sufficient to meet the financial needs.

Payments could be a little lower, but they do last longer. You can also decide the proportion of your pay out to be paid to your spouse. Therefore, your spouse may receive 100%, 75% or, even 50% of what you were receiving as pay out. The higher the percentage your spouse is guaranteed, the lower will the initial payments be.

Effect of Your Retirement Corpus Size on Your Annuity Choice

You can also note that the amount you have for your retirement corpus will have a say in your annuity choice.

For example, if you and your spouse need Rs. 50,000 per month (6 lakhs p.a.) as pension income post-retirement and have a retirement corpus of more than Rs. 2 crores, you can select ‘Joint Life Annuity with the return of Purchase Price’.

The interest from this corpus would be enough for you to withdraw Rs 6 lakhs a year (after 3% p.a. inflation) until the demise of the surviving spouse, without any effect on the original corpus.

However, if your corpus is lower than this, you should probably choose either the Joint Life annuity option or Life annuity with a return of purchase price. So, your spouse if surviving after you will either continue receiving the pension or have enough money to start a new one.

Single Life vs Joint Life Annuity – Summarising

There is no straightforward answer, and the decision depends on each person’s circumstances. It is certainly a tough decision to make, but the following pro tips could help:

a) Is your spouse totally/partially dependent on you for financial support? If yes, a joint annuity suits you.

b) Does your spouse work and/or have their own pension/annuity in place? Go for a single-life annuity then.

c) Are you willing to compromise and take away lesser pay outs so that your spouse gets cash flows when you will not be around? Joint annuities pay less because the annuity has to be paid for a longer duration.

To lead a financially independent, stress-free life in your 2nd innings, annuity plans are the best safety nets that give assured regular income to let you celebrate your golden years.

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Frequently Asked Questions (FAQs) for Retirement and Pension Plans

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the Premium calculator available in the ‘Tools and Calculator’ section of

The Invest 4G plan offers three benefit options to choose from. If you have opted for the Life Option or Whole Life Option, the insurer will pay the nominee(s) death benefit if the policyholder meets with an unfortunate incident. However, in the Life Option with Premium Funding, the policy continues even after the death of the policyholder. The company pays the remaining premiums until the policy matures.

Life is unpredictable and so it is important to prepare for all eventualities. If you regularly save a substantial amount of your income for retirement, the corpus may expand to a comfortable level before retirement. In case you become disabled and are unable to contribute to the retirement plans, most plans will continue to multiply your savings. The amount already accumulated will continue to grow and besides the existing plans you can also choose to invest in pension schemes specifically designed for people with disability.

Investment in ULIPs like Invest 4G plan qualifies for tax deductions under section 80C of the income tax law. The maturity benefits of ULIPs are also tax-exempt under section 10 (10D) of the Income Tax Act, 1961. However, if the premium paid during the policy term is more than 10% of the sum assured, the maturity proceeds will be taxable.

The concept of early retirement is catching up fast in India, but there are no specified ages for early retirement. While in some western countries the age between 35 and 45 is considered favourable for early retirement, in India the ideal age is 45-50 years. With the right planning and investments, it is not very difficult to retire early.

At the age of 35-40, people generally have several responsibilities such as children’s education and various EMIs. It is difficult to spare a substantial amount of income for retirement. Depending upon the needs of the household and the lifestyle, one should aim to save around 40-50% of his/her income. Around 10% of the income should exclusively be allocated for retirement planning. Here are some tips to choose the best retirement plan.

  • Focus on your needs: It is easier to formulate a strategy when the goal is clear. Make an estimate of the amount required to sustain your life. Take inflation into account and zero in on the targeted corpus.
  • Research thoroughly: Conduct thorough research before investing in any financial product. Read the term and conditions properly and try to understand how an investment product fits your needs.
  • Consider different products: The market is awash with all kinds of investment products. Do not follow conventional advice as the need of every person is different. Take into consideration all the suitable products, conduct an objective analysis and then invest.

Owning a house is a cherished dream for many. There are several ways to save for a new house, but in urgent cases, people may be tempted to withdraw from their retirement fund. There are various financial products for retirement planning, and all have different withdrawal rules. In the case of the National Pension Scheme, partial withdrawals for special purposes like buying a house are allowed only thrice during the policy tenure. However, to avail the withdrawal facility, you should be an NPS investor for at least 10 years and you are permitted to withdraw only 25% of your contribution. If you have a PPF account, you can withdraw 50% of the accumulated amount, but only after staying invested for at least 6 years. The Invest 4G plan also allows partial withdrawals after five years of investment.

The quantum of monthly savings depends on the specific needs of the buyer. Financial advisors, however, suggest people save around 15% of the monthly income for retirement.

Retirement plans such as NPS have a very low entry threshold. It is also open to all and anyone can open an NPS account and start saving. A small business can also invest in Invest 4G plan from Canara HSBC Oriental Bank of Commerce for as low as Rs 5000 every month.

The choice between paying off a student loan or start a retirement account is not a difficult one. Starting early for retirement planning has its own advantages but extending the student loan will increase the interest burden. You will have to find a balance between the two. Try to pay off the student loan as soon as possible, but do not hold back on investing in a retirement account.

Most people nominate their spouse to receive retirement benefits in their absence. But a spouse is not automatically entitled to be the beneficiary of a retirement account owned by the other spouse.

Gold is a safe investment asset and investors often flock to the yellow metal to stabilise their portfolios. Holding a small quantity of gold can be considered as the intrinsic value of gold remains intact. You can also choose to have an exposure to gold through ULIPs. ULIP funds invest in a variety of asset classes and some fund options also have a small exposure to gold. You can choose fund options with gold to have a small and indirect investment in gold.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

The government has allowed all central government pensioners to open a joint account with their spouses.

Vesting date or age signifies when your pension plan’s accumulation phase is over and the distribution phase can begin. For example, in a deferred annuity plan, you may have a vesting date which is 10 to 30 years away depending on your age at entry. You will continue to invest or stay invested till the vesting date. After the vesting date or age, you can start receiving the pension or withdraw the money from the plan.

The steps may differ from plan to plan. However, you can buy the online retirement plans following the steps below:

  • Retirement Calculator: Use a retirement calculator to estimate your corpus need and expected monthly investment amount to achieve it
  • Choose Plan: Select the online retirement plan you want to start investing in
  • Contact Information: Fill in the personal details including the contact information. Make sure to put the correct e-mail ID which you can access since all future communication about the policy will take place via e-mail.
  • Define Your Investment: Select the goal, investment term, investment frequency and amount you want to invest (based on the calculator estimate)
  • Select Fund Allocation: Online retirement plans give you the option to invest in multiple assets including equity funds. You can select the ratio in which your premium will be allocated to these funds as per your risk appetite. Then select one of the portfolio rebalancing strategies.
  • Select Withdrawal Plan: You can withdraw money based on set milestone or systematically from the plan after the lock-in period. Select the options for withdrawal as per your plan.
  • Review Plan & Investment Details & Complete the Application Form

You can pay the premium amount before or after completing the application form to start investing.

The best time to plan your retirement is when you are planning your career. However, this may not be the time when you really start investing money for your retirement. You must start investing in your retirement plan as soon as you start earning.

Retirement is the only financial goal you cannot repair with other means of funding like a loan. Thus, developing the habit of investing with every income you have is the best way to have a comfortable retired life.

Insurance allows your family, especially your dependent spouse to continue living without financial worries if anything happens to you. Also, insurance may help you save enough for retirement in case of permanent disabilities. Additionally, life insurance retirement plans allow you to build a good retirement corpus with bonus additions.

Yes, you can change the nominee of the policy anytime you need. If you are using an Electronic Insurance Account (EIA) to manage your policies, you can change the nominees anytime from this account. Otherwise, you can contact the customer care to update the nominations on your policy.

You can opt for auto-debit of the premiums from your savings account. You can also pay the premiums online using your debit card, credit card or a payment wallet.

You can get Rs. 1 Core pension plan using the online retirement calculator. The calculator will assess your eligibility and provide you with the probable monthly or annual investment to achieve the goal. If the amount seems feasible you can complete the purchase online or set an appointment for a qualified advisor to help you in the process.

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